Time Warner to unplug cable business

Time Warner confirmed on Wednesday that it was close to separating out its 84 per cent stake in Time Warner Cable, but declined to provide details as to how it would carry out the long-awaited transaction.

The media conglomerate made the announcement as it reported that first-quarter income fell 36 per cent to $771m, dragged down by continued weakness at its AOL internet division and a $116m restructuring charge at its New Line film label.

For the quarter, revenues grew 2 per cent to $11.4bn, aided by gains at its cable networks and film divisions. The company also affirmed its outlook, projecting full-year operating income to grow 7 to 9 per cent.

The separation of Time Warner Cable would mark the most decisive move by Jeff Bewkes to remake the company’s vast portfolio since he took over as chief executive this year. Time Warner Cable is the second-largest US cable operator, and accounts for about 40 per cent of its parent company’s earnings.

Mr Bewkes said he was “close” to finalising the details of the transaction, which some analysts believe could result in a $4bn windfall for shareholders. “We just believe the entities will be more valuable if separated rather than kept in the current structure,” he added.

Mr Bewkes also said that the company was pressing forward with efforts to separate AOL’s legacy internet access business from its new advertising-supported network. That change is expected to provide greater flexibility to pursue a sale of the dial-up business as he continues a strategic overhaul of AOL begun in 2006. For the quarter, the division’s revenues continued to slide, falling 23 per cent to $1.1bn as the loss of paying subscribers outweighed new advertising sales.

Mr Bewkes acknowledged disappointment with the drop in display adverts, which he attributed to slow efforts at integrating its Platform A advertising network. “There are some things we could have done better.”

However, he pointed to a 22 per cent gain in AOL’s page views, and increases in its advertising sales for partner sites as signs that the group was making progress.

In spite of a slowing economy, Time Warner’s cable networks, including CNN, TBS and TNT, continued to thrive. Revenue rose 10 per cent to $2.7bn as subscriptions and advertising sales both posted double-digit growth.

Revenues at Time Warner’s publishing division were essentially flat.