Time Warner, the world’s largest media company, said its cable systems division “delivered the best quarter in its history”, but the performance of its AOL internet business and Time magazine unit was less stellar.

The film division, the company’s biggest, also saw a drop in revenues but cost cuts pushed profitability up more than expected.

In the first quarter, Time Warner reported that net income rose to $1.5bn, or 32 cents per share, up from $915m, in the same quarter of last year. Revenue was up 1 per cent to $10.46bn, slightly below average expectations of analysts.

Specifically, Time Warner Cable gained subscribers, with customers keen on buying a bundle of video, internet and telephony services.

“Time Warner Cable delivered the best quarter in its history,” said Dick Parsons, chairman and chief executive of Time Warner. “The triple play bundle is working, driving customer satisfaction up and churn down.” Cable sector shares have rallied following similar results from other cable groups, easing investor fears of an all-out price war with telecoms rivals planning to offer a similar bundle.

Time Warner Cable is preparing for a 16 per cent spin-off, as part of the purchase of bankrupt operator Adelphia by Time Warner and Comcast. Mr Parsons said he expected the Federal Communications Commission to approve the Adelphia merger “shortly”.

Time Warner’s shares fell 1.8 per cent to $17.11 in morning trade.

The results were the first since Carl Icahn, the billionaire activist investor, called off a proxy fight for board control in mid-February. As part of the settlement, Mr Parsons agreed to a $20bn share buyback and to cut costs by $1bn by the end of 2007 in an effort to lift the share price, and said the company was on track to achieve both.

So far, $8bn has been spent buying back shares, around 10 per cent of shares outstanding.

Mr Parsons confirmed that Time Warner was in talks with Liberty Media about buying out its 50 per cent stake in CourtTV for cash. In addition, Time Warner is in talks to exchange part of Liberty’s 4 per cent stake in Time Warner for assets, believed to include the Atlanta Braves baseball team. A deal is expected soon.

Revenue at AOL and Time Warner’s film division, its largest, fell in the first quarter.

AOL’s loss of 835,000 dial-up customers pushed profits down 17 per cent to $442m. Advertising revenues at AOL rose by 26 per cent, however, as the restructuring of this part of the business is starting to pay off. Time Warner said it was looking into whether the “ownership structure” of AOL’s European businesses should change.

Film’s EBITDA exceeded expectations, rising 19 per cent on cost cuts and gains from selling international film rights. The Time Inc magazine business was “less robust” than Mr Parsons had anticipated, he said, reflecting weak advertising in sectors such as autos and the continued shift online.

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