Cable Operators

Parsons Optimistic on Time Warner’s 2005

12/06/2004 9:09 AM Eastern

New York -- Citing a turnaround in its financial fortunes in the past year, Time Warner Inc. chairman and CEO Richard Parsons vowed to make 2005 even better and hinted at returning some of its profits to shareholders at an industry conference Monday.

Speaking at the UBS Warburg Media Week Conference here, Parsons said that last year, he promised that Time Warner would finish 2004 stronger than it began. That done, he added, the new corporate focus will be to decide how to deploy its newfound financial capacity. That, he said, could take the form of continued investment in its businesses, as well as strategic acquisitions.

While Parsons said the company will also review programs to return some of that capital to shareholders in the coming months, he did not elaborate.

Time Warner made several moves to pare down debt, to simplify its operations and to sell nonstrategic assets in late 2003 and early 2004.

“We’ve turned the company around,” Parsons said. “We are headed in the right direction now.”
Parsons said that all of Time Warner’s businesses are either first or second in their respective industries. In addition, he said, the company is uniquely positioned to take advantage of the boom in Internet advertising.

Calling the Internet a “huge source of growth,” Parsons added that consumer spending on the Internet has tripled over the past five years and, this year, advertising revenue has grown 30%. America Online Inc. alone is expected to generate about $1 billion in ad revenue this year, he said.

“Online advertising is one of this country’s most exciting opportunities and, with AOL in our portfolio, I expect Time Warner to grow advertising faster than any of the other diversified media and entertainment companies next year,” Parsons said.

On the cable front, Parsons touted the positioning of Time Warner Cable -- the No. 2 MSO in the country, with 10.9 million subscribers. He added that the MSO has capitalized on new technologies and he sees even greater opportunity with digital-phone service.

“Within our footprint, the video, data and voice industries today account for about $25 billion in consumer spending,” Parsons said. “That’s important because approximately one-half of these revenues are from residential phone, of which we get almost none today.”

Time Warner Cable is on track to deploy digital-phone service in all of its markets by the end of this year.

Regarding programming-cost increases, Parsons said that although Time Warner Cable’s increases have been higher than those of some of its peers, they are in line on a per-subscriber basis with the rest of the industry.

“I’m not going to predict exactly where it will level off, but I do think the programming costs in our own cable systems will come down over time, from the low-double to the high-single-digits,” he added.

Parsons reiterated that Time Warner is interested in purchasing Adelphia Communications Corp., but that it is “a bidder for Adelphia at a price that makes sense.”

September