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NEW YORK — Time Warner Cable Inc. reported a 32 percent drop in first-quarter earnings Wednesday, hobbled by hefty restructuring charges, but revenue rose as consumers chose not to cancel cable to save money even in this economy. Investors sent shares up sharply.
There are signs of cutbacks, however. The nation's second-largest cable TV operator said revenue from premium channels such as HBO and paid video-on-demand fell as subscribers appeared reluctant to pay for additional entertainment on top of their cable TV packages.
Time Warner Cable said it picked up business from consumers who gave up their reliance on antennas in preparation for the shift to digital broadcasting in June.
"Cable is a great business," Chief Executive Glenn Britt said during a conference call with analysts. "We're growing when many companies and many industries are shrinking."
Shares of New York-based Time Warner Cable rose $3.87, or 14.2 percent, to close at $31.12 Wednesday.
In the quarter, Time Warner Cable earned $164 million, or 48 cents per share, compared with $242 million, or 74 cents, in the same period a year earlier.
But certain one-time items reduced net income by $92 million, or 27 cents per share. They include $43 million in restructuring charges mainly related to 1,250 job cuts, $40 million in costs to separate from parent Time Warner Inc. and $10 million in noncash charges related to an investment impairment.
Revenue rose by 5 percent to $4.36 billion, in line with expectations of analysts polled by Thomson Reuters who also forecast earnings of 61 cents per share.
Free cash flow, a key metric for cable operators, rose by 11 percent to $367 million.
Time Warner Cable expects 2009 earnings of about $3 per share, above analysts' forecast of $2.88.
Craig Moffett, an analyst at Sanford Bernstein, said Time Warner Cable's customer gains in video, phone and high-speed Internet beat expectations in the face of a deep recession, concerns about subscribers canceling cable entirely and strides by rival phone companies in offering video.
Analysts were expecting a loss of 77,000 basic cable TV customers, Moffett said. Instead, Time Warner Cable gained 36,000 subscribers.
The cable company also added 225,000 net customers for high-speed Internet service at home and 166,000 for Internet-based phone service, beating analysts' forecasts of 147,000 and 143,000 respectively.
Revenue from video services, which include cable TV and video on demand, rose by 2 percent to $2.67 billion, driven by price increases and a gain of 121,000 in net sign-ups for digital video. High-speed Internet revenue was up 11 percent to $1.1 billion while phone rose by 23 percent to $451 million.
Advertising was the weakest leg, down 26 percent to $145 million, but that represents just 3 percent of the company's overall business by revenue. The company expects ad revenue to be weak for several more quarters.
Looking ahead, Britt said the company will continue to test new products and services as part of cable's innovations. Two weeks ago, Time Warner Cable shelved plans to charge extra for Internet usage above certain bandwidth caps in the face of a public and political backlash. It had planned to expand the service to four new markets from just Beaumont, Texas.
"We got a lot of push back so we backed off the trial plan," Britt said.
As for talks to acquire online video site Joost, Britt would only say that the company's focus is to keep its investment-grade credit rating and pay down debt. Time Warner Cable ended the quarter with $23 billion in long-term debt.
Joost would give Time Warner Cable a leg up in online video amid plans by the cable industry and networks to stream cable network shows to any device but accessible only to subscribers.
Britt said the company continued to take customers from satellite TV, but phone operators' TV services are creeping into its markets. AT&T Inc.'s U-verse is now in 15 percent of Time Warner Cable's markets and Verizon Communications Inc.'s FiOS is in 7 percent.
To stay competitive, Time Warner Cable is rolling out ultrahigh speed Internet service this summer. It already tested speeds of 138 megabits per second downstream but the initial product won't be as fast. On Tuesday, cable operator Cablevision Systems Corp. said it will offer speeds of 101 Mbps next month, the fastest available from cable and phone companies. A more typical Internet speed from cable is closer to 6 Mbps.
A wireless service will be launched in a few markets late this year or early next year, Britt said, the result of its joint investment in Clearwire Corp. with other cable operators as well as Google Inc. and Intel Corp.
