Time Warner Cable Updates: TV Bills To Rise, Enters Spectrum Deal With Verizon

TWC: Time Warner Cable logo
Time Warner Cable

Source: Google Finance

Time Warner Cable (NYSE:TWC) has mentioned that it will be raising its pay-TV prices in early December. [1] The company further mentioned that half customers will not see a pricing change in the bills, implying that the rate increases will be applicable to certain programming packages. This increase in rate is resultant of rising programming fee that the company is looking to pass on to its customers. This is a trend we expect to see among other pay-TV companies such as Comcast (NASDAQ:CMCSA) and DirecTV (NASDAQ:DTV).

See our full analysis for Time Warner Cable

This brings up an interesting point related to Disney’s (NYSE:DIS) ESPN. The sports channels is the most expensive in terms of monthly fee per subscriber of more than $4.5 per month, and has been one of the prime culprits behind cable bill increases. [2] While the channel has been reaping profits for Disney, it is perhaps making service providers think about how they are going to tackle the rising fees, and continuing to pass it on to the consumers might not be the answer.

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In addition to the above, Time Warner Cable has also entered a spectrum deal with Verizon (NYSE:VZ) where Verizon will pay $3.6 billion to Time Warner Cable, Comcast and Bright House Networks to AWS spectrum. [3] The deal includes an option for Time Warner Cable to resell Verizon’s wireless services in future.

Overall it seems that analysts are holding positive view on Time Warner Cable, especially after recent events. Analysts from Stifel Nicolaus, Wells Fargo & Co. (NYSE:WFC) and Nomura have buy recommendations

Our price estimate of $70.62, implying a premium of little under 15% to the market price, echoes similar sentiments.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. Cable TV rates to rise, newsobserver.com, Nov 26 2011 []
  2. Cable-TV Honchos Cry Foul Over Soaring Cost of ESPN, The Wall Street Journal, Dec 6 2011 []
  3. Verizon Wireless nabs cable’s wireless spectrum for $3.6B, CNET News, Dec 2 2011 []