Time Warner Cable Inc.(TWC), the second largest cable MSO in the U.S., recently announced that it has included HBO GO and MAX GO,an online video service provider of Home Box Office Inc. (HBO). The inclusion of both the streaming services will improve the service quality of Time Warner Cable’s subscribers.
Time Warner Cable’s customers who will subscribe for HBO or Cinemax channel networks will enjoy free and unlimited access to the online video services of HBO GO and MAX GO.
With the growing popularity of tablets and smartphones coupled with the deployment of LTE networks, Time Warner Cable’s customers, who have HBO or Cinemax channel network subscriptions, can easily watch all their favorite TV series like Game Of Thrones, True Blood and many movies and documentaries anytime and from anywhere. Moreover, such service offerings will also counter the threat arising from online video streaming companies like Netflix, Inc (NFLX) and Hulu, hence improving the company’s churn rate.
On April 29, 2011, HBO GO was launched on iPhone, iPad and Android applications, and reported over three million downloads by the end of June 2011. Most of the cable TV companies have already included this new service facility with Time Warner Cable being the latest to jump into this bandwagon.
Looking at the growing popularity of online TV viewers HBO and Cinemax, both part of Time Warner Inc. (TWX), has also started offering video-on-demand service to its subscribers.
Solidfree cash flow and healthy demand for premium cable services along with strong share buyback program will drive the company’s top-line and bottom-line growth.
However, huge debt coupled with a rise in programming cost and continuous loss of subscribers will act as headwinds for the company going forward. Moreover, stiff competition from formidable rivals like Comcast (CMCSA) and AT&T‘s (T) U-Verse network as well as the newly emerged online video streaming companies like Netflix, Inc and Hulu, is expected to hurt profitability going forward.
We maintain our long-term Neutral recommendation on Time Warner Cable. Currently, Time Warner Cable has a Zacks #3 Rank, implying a short-term Hold rating.
