Time Warner Cable, the second largest multiple systems operator in the US, can expect revenues in 2004 to grow by 12% to $8.6 billion says a new report from Merrill Lynch.
The growth in the near term is expected to continue to be driven by further penetration of digital and high-speed data services, digital video recorders and high definition television. Longer term, voice over internet telephony is expected to be the next growth driver.
Cable advertising continues to be a source of growth for Time Warner; Merrill Lynch projects advertising revenue of nearly $600 million in 2004, up 27% from £470 million in 2003.
Currently Time Warner Cable manages cable systems passing through 19 million homes, providing service to nearly 11 million subscribers. Time Warner management has repeatedly suggested that it would welcome the opportunity to gain greater scale/size in cable. Merrill Lynch believes that Time Warner Cable will actively and aggressively explore the acquisition of Adelphia Communications.
Digital penetration is expected to grow by 45% by the end of this year, compared with a 40% growth achieved last year. However, as the year over year rate of digital sub penetration is slowly declining, digital subscribers are expected fall by 12%.
Like digital, the growth of high-speed data subscriber additions has also begun to decline. Currently growth is at 34%, compared with 63% last year but by the end of 2004, growth is expected to have fallen to 24%. Growth stems primarily from residential subscribers where penetration reached 17% at the end of last year, up from 14%.
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