Time Warner Cable (NYSE:TWC), the second largest cable service provider in the U.S., made a string of announcements recently pertaining to its efforts to enhance its pay-TV service with streaming options. The overall pay-TV industry is headed in this direction and broadband, as a medium of video delivery, is gaining importance. Pay-TV companies need to embrace this change to protect their market shares, although Time Warner Cable’s adoption has been rather slow compared to rivals such as Comcast (NASDAQ:CMCSA) and Dish Network (NASDAQ:DISH). The recent announcements, however, indicate that the company is shifting gears and is willing to adapt to the changing environment in the pay-TV industry.

See our complete analysis for Time Warner Cable

Slow Start to Embrace Streaming

Last year Time Warner Cable introduced its streaming app for the iPad, which led to some disputes with content companies. Almost 10 months later, it made the same app available for the iPhone. In the fast-changing entertainment world, this seems like an awfully long wait. Furthermore, the cable company took several months before it started offering Time Warner’s (NYSE:TWX) HBO Go app to subscribers.

On the other hand, its competitors have been more proactive. Comcast has continued to enhance its Xfinity service and embrace mobile devices more quickly than Time Warner Cable. Dish Network has stepped up its efforts through its ambitious plan of introducing Blockbuster’s movie streaming service while its plans to launch a broadband service are in the works.

Time Warner Cable’s reluctance to embrace these changes have impacted its net subscriber additions. While TWC continued to lose more than 120,000 subscribers in Q4 of 2011, Comcast significantly cut its subscriber losses to just 17,000.

Momentum Has Started To Pick Up Now

However after unveiling its app for the iPhone in January 2012, Time Warner Cable recently announced that it is bringing its streaming capability to PCs as well as Macs.^[1] Subscribers will now be able to access live programming of up to 200 channels on their computers at home. Soon after this announcement, Time Warner Cable’s Digital Communication Director, Jeff Simmermon, tweeted that the company may be ready with an app for Android-based systems as soon as the end of March 2012. ((Time Warner Cable streaming to Android soon, Slash Gear, Feb 15th 2012))

These are encouraging signs that Time Warner Cable has placed more of an emphasis on streaming and management realizes that quicker adoption of newer technologies is critical in a competitive market. We expect some of these service enhancements to help improve the company’s Q1 2012 some, and we could see the pay-TV subscriber trends might improve thereafter.

We estimate that the pay-TV business constitutes a little over 40% to Time Warner Cable’s value.

Our price estimate for Time Warner Cable stands at $65.67, implying a discount of about 15% to the market price.

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