Time Warner Cable (NYSE:TWC) recently reported growth of its broadband internet subscribers. We have updated the Trefis price estimate for TWC from $34.98 to $36.74 (versus a market price of $45.12) based in part on expected increases in TWC’s broadband internet market share and the resulting impact on TWC’s stock.
Broadband Internet is 35% of TWC’s Stock
We estimate that the broadband internet business constitutes about 35% of Trefis price for TWC’s stock, similar to the contribution of the company’s digital cable business. The value of broadband internet business depends on two important drivers – market share and pricing. We focus below on how TWC’s market share will trend.
Broadband Internet Market Share Will Reach Nearly 13%
Despite the slowdown in the economy, Time Warner Cable added more than half a million broadband subscribers in 2009, taking the total subscriber count to about 9.3 million subscribers. We estimate that Time Warner Cable will have slightly less than 12% market share within the US broadband internet market in 2010 and that this will approach nearly 13% over the Trefis forecast period.
We believe the 2009 subscriber gains for TWC, as well as gains made by its biggest competitor Comcast (NASDAQ:CMCSA), were driven by the increasing demand for high speed internet among existing cable consumers. We expect Time Warner Cable’s ability to bundle services (TV-internet-phone) will continue to attract new and existing subscribers to its broadband internet services and help drive the increase in TWC broadband internet market share.
You can modify our forecast for TWC’s broadband internet market share to see how important of a driver it is for Time Warner Cable’s stock.
[...] a forward looking valuation analyst, says future growth at Time Warner Cable will largely come from consumers looking for broadband conne… While the company’s digital cable division still constitutes the majority of its stock price [...]