Time Warner Cable (NYSE:TWC) recently reported its Q1 2011 earnings and based on positive trends in broadband, we have updated our estimates. In looking at the last couple of earnings, we see the a similar story emerging: broadband subscriber gains accompanied by video subscriber losses. The company competes with satellite pay-TV providers like Dish Network (NASDAQ:DISH) and DirecTV (NASDAQ:DTV), cable companies like Comcast (NASDAQ:CMCSA), and telecom operators like AT&T (NYSE:T) and Verizon (NYSE:VZ).
Our price estimate for Time Warner Cable stands at $70.23, roughly 8% below the stock’s market price.
(Chart created by using Trefis' app)
Broadband Base Increasing, Video Base Falling But Losses Reducing
The table below shows the subscriber trends for last few quarters and summarizes trends we have seen.  Time Warner Cable has done well with its broadband offering; however, it still continues to lose video subscribers to satellite and telecom competitors. While digital video subscriber base is increasing, losses are primarily concentrated in basic cable subscriber base.
A couple of things are quite evident from the chart. One, Time Warner Cable has continued its momentum in the broadband market, thanks to the adoption of its Turbo and Docsis 3.0 offerings that are also helping the company improve average revenue per broadband subscriber.
The second observation is that although total video subscribers are still declining, the losses are slowing. We can attribute this to a number of product improvement strategies that Time Warner Cable has employed in recent quarters. For instance, the company has deployed video switches to improve HD channel availability, introduced its ‘TV Essentials’ package for low-end customers and introduced the iPad app.
In short, the future looks bright for the company as it looks to be taking right steps to improve its subscriber trends. On a cautionary note, telecom companies like AT&T and Verizon are still a threat.
AT&T in particular is advertising in almost a quarter of the areas that Time Warner Cable serves, and this will continue to add competitive pressures going forward.  We currently estimate slight pay-TV market share declines for Time Warner Cable followed by stabilization. However, if telecom operators can gain subscribers in Time Warner Cable’s geographies, the company’s stock could see some downside. You can gauge this by modifying the chart above.Notes:
- Data taken from Time Warner Cable’s SEC filings
- Time Warner Cable’s Q1 2011 Earnings Transcript, SeeingAlpha