Q1 2012 Earnings Call Transcript
Transcript Call Date 04/26/2012

Operator: Hello and welcome to Time Warner Cable's First Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now, I'll turn the call over to Mr. Tom Robey, Senior Vice President of Time Warner Cable Investor Relations. Thank you. You may begin.

Thomas Robey - SVP, IR: Thanks, Candy, and good morning, everyone. Welcome to Time Warner Cable's 2012 first quarter earnings conference call. This morning, we issued a press release, detailing our 2012 first quarter results. Before we begin, there are several items I need to cover.

First, we refer to certain non-GAAP measures, including operating income before depreciation and amortization or OIBDA. In addition, we refer to adjusted OIBDA, adjusted OIBDA less capital expenditures and adjusted diluted earnings per share. Definitions and schedules setting out reconciliations of these historical non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release and trending schedules.

Second, today's announcement includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management's current expectations and beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein due to various factors, including economic, business, competitive, technological, strategic and/or regulatory changes that could affect our business.

These factors are discussed in detail in Time Warner Cable's SEC filings, including its most recent Annual Report on Form 10-K and quarterly report on Form 10-Q. Time Warner Cable is under no obligation to and in fact, expressly disclaims any such obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

Third, today's comments on our outlook for 2012 do not include the impact of the expected sale of AWS spectrum by SpectrumCo, and finally today's press release, trending schedules, presentation slides and related reconciliation schedules are available on our Company's website at A replay of today's call will be available beginning approximately two hours after the call has ended and will run through midnight Eastern Time April 30.

With that covered, I'll thank you and turn the call over to Glenn.

Glenn A. Britt - Chairman and CEO: Good morning, and thanks for joining us. Time Warner Cable has built a reputation for steady and predictable performance, and our first quarter results were steady and predictable. Residential broadband and business services were standouts. We grew business services revenue by over 37% on a year-over-year basis in the first quarter primarily through organic expansion and our acquisition NaviSite last April. This continues to be a terrific opportunity for us.

We also continue to be very excited by broadband. We are gaining traction in our efforts to sell broadband single plays. We are continuing to see a very favorable mix shift towards higher speeds and we are taking share from the telcos. In fact this quarter, we had more broadband net adds than Verizon and AT&T combined.

When we announced the Insight acquisition last August, we knew that we've struck a good deal to buy a superior property. Now that we've closed this transaction and begun the integration, it looks even better than we thought. We are very pleased with the quality of Insight employees, the state of its plans, its reputation in the marketplace and the depth of its customer relationships. We expect Insight to have a significant positive impact on free cash flow this year.

We reached a notable milestone at the end of March. Since initiation of our share repurchase program six quarters ago, we have bought more than 50 million Time Warner Cable shares. Coupled with our dividend this demonstrates our continued commitment to return capital to our shareholders.

Now I will turn the call over to Rob and then Irene to dive into the details. Rob?

Robert D. Marcus - President and COO: Thanks Glenn, and good morning everyone. As Glenn said we are off to a good start in 2012. Business services growth continues to accelerate and in residential services we are actively pursuing numerous initiatives designed to enhance the value of our products and to improve our performance throughout the customer lifecycle. As this quarter's numbers demonstrate our efforts are paying off.

The economic and competitive environment didn't change much in the first quarter. We continue to see aggressive promotions from competitors and we now estimate that AT&T's U-verse is available in a quarter of our footprint and Verizon's FiOS is available in around the 11%. This overlap is slightly lower than last quarter, due to the acquisition of Insight, which has relatively less overlap with U-verse and none with FiOS.

So perhaps I should start with the Insight acquisition, which closed almost 60 days ago. We are thrilled to have the opportunity to serve Insight’s customers in Kentucky, Ohio and Indiana, and we’re excited to bring on board some really terrific and dedicated employees. I would note that with the acquisition Time Warner Cable now has over 50,000 employees and more than 15 million customers relationships.

The quick summary is that Insight was well run, its reputation in the marketplace was strong and it has had good subscriber momentum in recent months and the plan is in even better shape than we had anticipated. So, we're starting from a position of strength. And we are making good progress on integration.

We have taken actions to close Insight's New York headquarters. We're already enjoying the benefits of reduced programming costs and our operations and technical staffs have begun the process of moving Insight's Internet and phone customers to our platform. That process should be complete around the end of this year. So, two months in, we feel very good about the acquisition and we remain confident of our ability to realize the synergies we identified at the time of announcement.

Now, let me switch to a discussion of our subscriber performance. Q1 net adds, which excludes subs acquired with Insight are shown on Slide 3 of the presentation materials. Our customer acquisition strategy in the first quarter drove a 30% year-over-year increase in triple play connects as well as an uptick in migrations of existing customers from single and double plays to triples, resulting in triple play net adds of a 125,000. That's our best triple play performance since early 2009.

Consumers are clearly responding to our more competitive offers and our more targeted messaging. Our focus on triple play bundles accelerated phone connects, which drove first quarter residential voice net adds of 112,000. That's the best in three years. We intend to continue to promote phone net adds through competitive offers recognizing that it may moderate our phone ARPU somewhat, perhaps bringing it closer to the level of our peers.

Residential high-speed data was also very strong in Q1 in fact, the strongest it's been since Q1 of 2009. Net adds of 214,000 benefited from increased HSD connects as part of triple play bundles as well as a spike in HSD single play connects, driven by our aggressive DSL win back promotion.

Our surveys show that almost two-thirds of those who switched from DSL said their old service was too slow. While we added over 100,000 standard tier Internet customers driven by the win back offer we continued to see real strength at the high end. Residential wideband customers increased 50% on a sequential basis to 218,000 and almost two-thirds of our HSD net adds signed up for either Turbo or wideband. Together these high-end tiers now comprise 20% of our residential Internet subs up from less than 16% a year ago.

Video continued to be a soft spot in Q1. We had a net decline of 94,000 residential video subs. Again the decline was almost exclusively in analog single plays. DVR net adds of 92,000 were the best in two years driven by our triple play promotions and the availability of whole home DVR. While I hesitate to say much about Q2 subs given how early we are in the quarter and how much of second quarter seasonal disconnect activity typically occurs when colleges let out in May and June, I will say that so far Q2 this year looks more or less like Q2 last year. Voice net adds are somewhat higher than last year, HSD about the same and video weaker.

I mentioned that we’ve got a number of initiatives underway to drive even better performance. We’re working on both ends of the customer lifecycle to improve subscriber net adds including video. On the acquisition side we are hoping to expand our residential direct sales force by almost 1,000 reps this year. We believe that this can be a very effective channel to drive connects. We just began hiring and bringing on new contractors earlier this month and the on-boarding process will continue throughout this year. We should begin to see this initiative reflected in our connect volumes late this year and in 2013.

We are also systematically retraining our inbound sales reps in a more disciplined approach to selling and more specifically to upselling. A lot of it probably falls into the category of better blocking and tackling but I will tell you that when we focus every person, every campaign and every call on driving increased revenue per call we see results. We're also improving our retention operations to reduce customer churn and preserve monthly recurring revenue. The first step was to implement systems and processes to ensure that all retention calls are funneled to retention specialists. The second step is to consolidate our retention operations into centers of excellence.

In our east region for example we expect to have all of our retention reps in just two call centers by the end of Q3. Consistent with our Enjoy Better campaign we continue to drive product innovation to enable our customers to better enjoy the things they are passionate about.

In broadband we now have DOCSIS 3.0 available in 85% of our passings, expanding our capacity and enabling us to offer even faster speeds to more customers. Earlier this year we standardized and increased speeds across most of our tiers, notably our turbo tier now offers 20 by 2 speeds, extreme is 30 by 5, and ultimate is 50 by 5. For customers who don't use a lot of capacity and are looking to save a few bucks we launched Internet essentials in South Texas and we expect to roll it out more broadly over the course of the year.

We are also making our WiFi offering more robust our LA build-out is proceeding well. We've now deployed about 2,000 WiFi access points and we are on track to have close to 10,000 by year end. Those of you in the New York City area may already have noticed the availability of TWC WiFi in more places.

Through our arrangement with Comcast and Cablevision, over 20,000 WiFi hot spots throughout the metropolitan area are now available free of charge to eligible Time Warner Cable Internet customers. And the WiFi hot spots in New York City and LA are all using a common authentication platform. So eligible TWC customers from anywhere in the United States will be able to access the TWC WiFi hot spots in New York City and Los Angeles no matter where they live.

Our video product continues to get better too. A couple of weeks ago, we launched live-TV in the home, on new Android devices like phones and tablets running Version 4 of the Android Operating System. The same capability also is available in beta on PCs and Macs. In addition to delivering video to more devices in the home, we are making the offering itself even more robust. We now have a total of 255 channels available on TWC TV, including 26 broadcast channels recently added in New York City and 25 sports networks across New York, Charlotte and Texas.

As you may have read, earlier this month, we and Verizon Wireless began selling each other's products and services in four cities, Raleigh, Cincinnati, Columbus and Kansas City. It's still early going, but we are enthusiastic about the possibilities.

We are also pleased with customer response to SignatureHome and TV Essentials. We added a best ever 14,000 SignatureHome customers in Q1 bringing the total to 50,000, and we just signed an exciting marketing pact with American Express to present an exclusive offer to card members who sign up for SignatureHome with their American Express cards. We think partnering with AmEx is a great way to promote the SignatureHome product and further enhance our brands. On the other end of the product continuum, we had about 6,500 TV Essentials connections in Q1, about 5,000 of which were either new customers or upgrades from Broadcast Basic. We now have around 11,000 TV Essentials customers. Perhaps equally important we’ve been using TV Essentials as a low-priced beacon for video and we have been quite effective at up selling most of the call volume.

In customer care we have lots of initiatives in the works, but I would like to update you on one initiative we made – we mentioned last quarter. We are driving a pretty dramatic redo of our self installation practices, in the expectation that it can deliver both higher customer satisfaction and lower costs. We’re expanding the number of transaction categories eligible for self installation and we’re executing a higher percentage of self installs in each category. For us it’s a cost savings for each truck roll avoided and for the customer it means getting it done on their terms and on their schedule.

Turning to Business Services, I think the growth rate really says it all. We continued to ramp the sales force in the first quarter and we’re adding sales support personnel and systems to drive higher productivity. In addition we are proactively connecting new buildings to our network, and of course we’re very pleased with the growth at NaviSite.

So in closing we’re aggressively driving change to deliver better residential unit growth, more innovative product and more customer centric care. We’re continuing to invest in and drive business services growth, and at the same time we’re engaged in the integration of Insight to realize the full benefits of the acquisition. There is much to do and we’re executing well.

Thank you and with that I’ll turn it over to Irene to discuss our financials.

Irene M. Esteves - EVP and CFO: Thanks, Rob, and good morning, everyone. My presentation this morning includes one month of financial results from the acquisition of Insight, which we closed on February 29th. I will start with our first quarter highlights on Slide 4. We are off to a good start in 2012. We grew first quarter revenues 6% over Q1 '11, as business services revenue grew over 37%, residential revenue increased 4% and advertising revenue was up 7%. Adjusted OIBDA grew 8% in the quarter, reflecting our strong revenue growth and higher adjusted OIBDA margin. The acquisitions of NaviSite and NewWave in 2011 and Insight in the first quarter 2012, accounted for about half of our total revenue growth and around 30% of our adjusted OIBDA growth for the quarter.

Operating income increased just under 7% and we generated free cash flow of $718 million. Diluted earnings per share increased 29% to $1.20 and adjusted diluted EPS, which eliminates certain items affecting comparability, also grew 29% to $1.30. We returned $532 million or 74% of free cash flow to shareholders through paying cash dividends of $179 million and repurchasing $353 million of our common stock, the 74% return was consistent with our stated goal to bring our leverage ratio with normal adjustments down to our target of 3.25 at the close of Insight.

Before we get into the presentation, let me point out that throughout my comments, I'll be updating our 2012 outlook to include Insight. But they will not include the sale of AWS spectrum by SpectrumCo, until that transaction closes. I'm also going to give you as much color as I can this quarter on the impact that Insight has had on our results. But after this quarter, we will not be able to provide much detail beyond the revenue impact as we're quickly integrating Insight into our existing operations.

So, let's jump right into financial results on the next slide. The first quarter revenue increased 6% year-over-year to $5.1 billion with total ARPU per customer relationship increasing 4% to about $116. Of our total revenue growth of $307 million, $149 million came from acquisitions with $93 million from Insight, $36 million from NaviSite and $20 million from NewWave. Of the $158 million of organic growth, $74 million of growth came from business services, $72 million from residential services and $12 million from advertising and other revenue combined.

Moving to Slide 6, we delivered another record quarter of business services growth, which accounted for 38% of our overall revenue growth. Business services revenue was up $117 million or 37%. Organic revenue represented $74 million, while NaviSite and business services from Insight and NewWave contributed roughly $43 million of growth. Total business HSD revenue increased almost 25% driven by growth in shared and dedicated internet access as well as Metro Ethernet. This is our best quarterly growth in at least three years.

Business voice revenue increased 50% driven by subscriber growth and wholesale transport revenue of $41 million increased 28% and was driven by growth in cell tower backhaul. At quarter end we had an installed base of about 7,900 radios and a meaningful backlog under contract. Excluding the impacts from acquisitions, business services revenue grew 24% our 8th consecutive quarter of over 20% growth.

When we reported fourth quarter results we told you that we expected business services revenue growth to be in the 25% to 30% zone this year and our first quarter performance is a great start. Including Insight, we now expect business services revenue growth at the upper end of that range.

For residential services let's start with revenue on Slide 7. First quarter revenue grew 4% including Insight and NewWave excluding the impact from acquisitions revenue grew 1.7% driven by a combination of HSD and video subscriber growth and improved ARPU in video and HSD, partially offset by video subscriber losses and lower voice ARPU. Excluding acquisitions the residential growth story was all about HSD. There HSD revenue was up a robust 7% for the first quarter contributing $79 million to first quarter growth. Voice growth was about flat and video revenue declined slightly.

Switching to Slide 8, Rob spent a lot of time with you last quarter highlighting our renewed efforts at getting and retaining customers in what remains a challenging economic and competitive environment.

This coupled with our ongoing efforts to move existing customers up the value chain continued to drive organic revenue growth. Our acquisitions of Insight and NewWave added to residential revenue growth. ARPU per PSU increased 1% with video and HSD ARPU showing good growth at 3.2% and 2.3% respectively while voice ARPU declined 2.9%.

Overall ARPU per PSU growth moderated from year ago levels primarily due to success of our $89.99 triple play offer and a lower percent of our customers being eligible for rate increases this year.

While this $89 offer helps drive volume it does have a dampening effect on ARPU. In addition to driving volume we are focused on making each household more profitable. Our residential ARPU per customer relationship increased sequentially for four of the last five quarters.

Flipping to Slide 9 overall first quarter residential HSD revenue growth was driven by subscriber increases the acquisition of Insight and NewWave and 2.3% improvement in residential HSD ARPU. This is the 12th consecutive quarter of residential HSD ARPU improvement. The ARPU improvement reflects the continued benefit from price increases and improved HSD subscriber mix as we migrate subscribers to higher price tiers of service. In fact, at quarter end, Turbo and Wideband subscribers combined comprised almost 20% of our historical TWC residential HSD customer base. Up 16% from a year ago, Wideband subscribers alone increased 50% from the fourth quarter.

Moving to Slide 10, total first quarter residential voice revenue improvement was driven by subscriber growth including subscribers from acquisitions offset by a 2.9% decrease in ARPU. Excluding the impact from acquisitions, residential voice ARPU declined 3.4%. As we told you last quarter, we are improving the voice value proposition to our customers, and as a result, our first quarter residential voice net adds are the highest we've seen since the first quarter of 2009. We expect that the increases in subscriber volume coupled with our efforts to improve our cost structure will produce higher voice revenue and profit.

Turning to Slide 11, the improvement in overall first quarter residential video revenue was driven by the additional revenue from acquired systems. Excluding acquisitions, video revenue was down slightly. Video ARPU increased 3.2% driven by price increases, a more favorable video subscriber mix, increased equipment rentals and an increase in DVR revenue. These factors were partially offset by a decline in Video-on-Demand and premium channel revenue.

On the next slide, overall first quarter advertising revenue of $211 million increased 7% or $14 million over very strong Q1 ’11. Ad rep deals where we sell the advertising for other video distributors added $5 million, while political advertising and revenue from acquired properties each contributed another $4 million. As we look forward we continue to expect that we'll be able to grow ad revenues in the double-digit range in 2012 driven in part by political spending in the second half of the year.

Let’s turn to Slide 13, first quarter adjusted OIBDA grew 8% and our margin increased 60 basis points. The improvement primarily reflects our cost savings initiatives in voice, as well as the savings from ongoing efficiency initiatives. First quarter operating income rose 7% to over $1 billion. Our operating income margin expanded 10 basis points to 20.3% despite $39 million increase in merger related and restructuring costs.

The first quarter operating expense, which included $60 million from Insight, $32 million from NaviSite and $14 million from NewWave grew 5% compared to last year. Employee costs were up 10% reflecting higher headcount, including the addition of Insight, NaviSite and NewWave employees, and higher compensation costs per employee. Pension expense and equity-based compensation costs increased $15 million and $12 million respectively. Excluding the impact from acquisitions, employee costs were up 21% in business services and just under 5% in the rest of the Company.

Programming expense increased 5% in aggregate and 6% on a per subscriber basis. The increase was driven primarily by contractual rate increases, the acquisition of Insight and programming adjustments that reduced programming expense in the first quarter of 2011 by about $18 million. This was partially offset by the organic decline in video subscribers. We continue to expect the increase in programming cost per sub in 2012 to be between 8% and 9% including programming expense for the Insight acquisition.

Voice costs were down close to 11% from a year ago driven primarily by the benefits from the in-sourcing of voice support functions that we talked about for some time. Residential voice costs per sub per month in Q1 were around $9. We don't expect this to change materially in 2012, since we are not planning to migrate large numbers of additional subs until 2013, and you'll remember we started to see the savings from the migrations in the second quarter of last year, so the year-over-year impact in the remaining quarters of this year should moderate.

During the first quarter, we continued to invest in new initiatives including our WiFi buildout, our new home monitoring product IntelligentHome and our LA RSNs. In Q1, the combined net costs from these initiatives were approximately $10 million. This compares to $15 million from the first quarter of 2011 primarily related to mobile HSD and IntelligentHome.

In 2012, we plan to continue investing in WiFi and IntelligentHome and launch our LA RSNs in the fourth quarter. Overall, we still expect our total 2012 net costs from new initiatives to be in the range of $100 million to $150 million. The lion's share of this is expected in the fourth quarter consistent with the start of the NBA season.

Moving on to Slide 14, operating income for the full year will include expenses related to the acquisition of Insight. We incurred $35 million of merger-related costs in the first quarter and expect another $35 million in merger-related costs during the remainder of the year. We also expect the impact of the Insight acquisition and the roll-off of some Adelphia assets in July to impact depreciation and amortization expense during the remainder of the year as detailed in Slide 14. For the full year 2012 even with the investments behind our new initiatives and the Insight costs, we now expect to generate operating income growth of around 10%.

Turning to the next slide, first quarter diluted earnings per share increased 29% to $1.20 and adjusted diluted EPS which excludes a number of items affecting comparability that are detailed in Note 1 of our press release also increased about 29% to $1.30. Looking forward we expect that 2012 full year diluted EPS including Insight will now be in the upper end of the $5.25 to $5.50 range that we have provided on the fourth quarter earnings call.

Turning to capital spending on Slide 16, our capital spending in the first quarter was $706 million, a 6.5% increase from first quarter '11. CapEx as a percentage of revenue was 13.8% essentially unchanged from the first quarter last year. Business services capital expenditures were $120 million, a 6% increase from 2011 but down to 28% of revenue from (36%) last year. Over 50% of the CapEx was attributable to line extensions and expanding our cell tower backhaul footprint. Line extensions to connect new buildings were up 30% from first-quarter '11.

Residential advertising and other capital expenditures were 12% of revenue up from 12.2% in 2011 due primarily to higher support capital. The increase in support capital was driven by the investment in our new national data center in Charlotte and the production facilities for LA RSNs. These investments are consistent with our efforts to continue to allocate capital to residential products and projects that will help us to more rapidly deploy product enhancements, improve our customers' experience and add to our existing offerings.

We expect the capital intensity, excluding the impact of Insight will continue to decline with full year capital spending in the $2.9 billion to $3 billion range consistent with the levels of the last two years.

In addition to that we expect about $150 million of Insight related capital in 2012. Moving on to Slide 17, free cash flow for the first quarter was $718 million compared to $927 million in the first quarter of 2011.

Recall that first quarter '11 free cash flow benefited from $270 million tax refund related to bonus depreciation in the first quarter of 2011 that did not repeat this year. So the decline in free cash flow was largely driven by the absence of the tax refund, coupled with the higher net interest payments and CapEx partially offset by higher adjusted OIBDA. And before I move to our capital returns let's flip to the famous Slide 18 as reminder that we expect cash taxes to increase in 2012 due to the decrease of bonus depreciation from 100% to 50% in the economic stimulus legislation and reversal of bonus depreciation from prior years.

Assuming flat organic CapEx plus the $150 million of Insight related CapEx in 2012. We expect that the lower net stimulus benefits alone will push taxes approximately $700 million higher. This increase should be somewhat offset by an estimated $50 million of tax savings related to 10 months of benefit from the Insight NOLs and approximately $50 million of other items associated with the Insight transaction including the bond redemption.

Excluding the impact of the bonus depreciation, we are now expecting 2012 free cash flow to grow in the range of 20% to 25%. Keep in mind that historically, free cash flow generation tends to be lower in the second half of the year.

Let's move on to our capital return slide. Before I get into the details, I'm pleased to report that we have commitments in place from our relationship banks to extend the maturity of our backup credit facility to 2017 for $3.5 billion and we expect to close this transaction shortly.

We ended the quarter with net debt and preferred equity totaling $24.5 billion. A $2.9 billion increase from year end 2011 and a reported leverage ratio was 3.33 times our last 12 months adjusted OIBDA. Including the normal adjustments and including a full year of estimated Insight adjusted OIBDA, we are right on top of our 3.25 leverage target.

In the first quarter, we returned 74% of free cash flow or $532 million in total to shareholders, $353 million share purchases and $179 million in dividends. As I highlighted earlier, the 74% return of free cash flow was in line with our stated plans to come to a soft landing at our target leverage ratio following the close of Insight. With our higher free cash flow guidance, we are reiterating our expectations for the full year 2012 to return more than 100% of free cash flow to shareholders through dividends and share repurchases assuming the absence of a significant acquisition or other strategic events.

So in summary we are off to a good start in 2012. Business services continues to deliver strong growth, on the residential side we are migrating more customers into bundles and increasing our revenue and profit per household. We've closed Insight and brought our leverage ratio to a soft landing on our target and our outlook for 2012 includes significantly strengthened free cash flow and expectations of returning more than 100% of that to shareholders this year. Thank you.

With that I’ll turn it over to Tom for the Q&A portion of the call.

Thomas Robey - SVP, IR: Thanks, Irene. Candy, we are ready for Q&A portion of the conference call. Once again, we would ask each caller to ask just a single question so that we can accommodate as many callers as time permits.

Transcript Call Date 04/26/2012

Operator: Ben Swinburne, Morgan Stanley.

Benjamin Swinburne - Morgan Stanley: Glenn I wanted to ask you about the broadband business. I think the results speak for themselves on market share and also mix shift as you guys continue to migrate your sub base up to higher tiers. I wanted to ask you a question that was asked to me recently, which is, how much do you think you can push pricing and broadband before you start attracting the wrong kind of attention. I am asking this in the context of the stuff happening and do you see this week and some of the noise out of Netflix around net neutrality, because it is clear the product has tremendous pricing power the price value offered in the marketplace is there. But obviously you live in a world and you have been in cable for a long time that’s sort of either regulated or call that regulated. So how do you think about that question and I'd love your thoughts on it?

Glenn A. Britt - Chairman and CEO: I think as with a lot of things in life there has got to be balance in this and it’s – I am going to avoid making any really specific comments on pricing for obvious reasons, but I think suffice it to say that we have a product that is being used more and more and more every year by people. It has more and more value, and we are comfortable with that, that means that over time that we can charge for something. Usually if something is useful and it has more value, you can charge more for that over time. So I don't think I want to go beyond that.

Benjamin Swinburne - Morgan Stanley: Do you have any comment on the sort of managed services or cap counting around streaming products from MVPDs or cable operators versus alternates? I know you guys obviously have a streaming product that is available. How do you think about that in the context of the caps you've started to implement in some of your markets?

Glenn A. Britt - Chairman and CEO: Yes. I think just to clarify – thank you for the questions, there is a lot of confusions. So there are set of standards called IP, Internet Protocol and those can be used for a wide variety of things in the world. There is also something called the public Internet which happens to use IP standards. That doesn't mean those two things are exactly the same. So the application that we have on the iPad is over our closed circuit network. It's just a different standard than we've used traditionally for our video, but it's not the public Internet. So separately, on the public Internet, I think we've been pretty clear about this. We do think over time, there will be a consumption element to the tiers. What we've done in South Texas and we actually did this in the previous quarter – earlier this quarter – the timing confuses me. Anyway, a few months ago, we announced that people there who want to save money could buy a tier that had a consumption element to it, but we retained our unlimited tier with no cap. I actually don't like the term cap and I think we should always have that. So this was not in any way coercive People who wanted to save money could, people who wanted to keep what they had have kept it and they still have unlimited. So our plan is to roll that out further across our footprint as the year goes on.

Robert D. Marcus - President and COO: Ben, I'll just chime in on your specific question about how, did the two pieces you asked about relate to one another. Usage by our customers of our video product via the iPad has no impact on their usage under those plans we implemented in South Texas.

Glenn A. Britt - Chairman and CEO: I think that makes common sense. So if we happen to include the video in MPEG-2 which is our usual digital standard nobody even thinks to ask the questions that count in your cap or not. So the fact that we are choosing to have another feed that’s encrypted in IP shouldn’t really change that outcome.

Operator: Jessica Reif Cohen, Bank of America Merrill Lynch.

Jessica Reif Cohen - Bank of America Merrill Lynch: I just wondered if you could comment on – or discuss your expectations of the Verizon Wireless JV. I know it's just launching but as you allowed over the course of the next year or so, what kind of potential can you get from having this Verizon Wireless as a marketing partnering? And also could you discuss the potentials of the technology JV, what kind of products or services would come in – you expect to come in at that?

Glenn A. Britt - Chairman and CEO: Jessica let me take the first one and let Rob deal with the second one. Obviously, it's very early. We've just launched barely in four markets this agency deal and way, way too early to talk about anything. I do think on the surface though that for us Verizon is a very interest marketing channel in this – again this is an agency deal. They have stores all over the place. They sell a lot of units every year of their own product and I think that that will be good for us, assuming that it gets all the way through the regulatory approval. So we are enthusiastic about it.

Robert D. Marcus - President and COO: Jessica, let me try to link the two pieces of your question. Today what we are offering in the four markets that we are currently selling one and others products in is essentially a promotion that involves the inclusion of a $200 gift card to the extent the customer buys both Verizon Wireless plan and at least upgrades to one additional PSU of a Time Warner Cable product. Over time what we envision is that we will focus less on bundle discounting which is effectively what the gift card is and more on product enhancements that can only be experienced if a customer is a subscriber to both services and really that's the focus of what the technology JV is working on. The goal, well I'm not prepared to announce any of these product enhancements today would be to create value out of the linkage in the corporation of the two companies and really all of the cable companies in Verizon Wireless. So, I think the two pieces, the agency agreement and the technology joint venture are intimately related to one another, because the value proposition rests in part and what we can come up with on the JV side.

Jessica Reif Cohen - Bank of America Merrill Lynch: Is there any sort of timeframe for products?

Robert D. Marcus - President and COO: I think we are going to start to – this is something that will evolve over time, but the hope is that before year end, we'll have some additional features to talk about.

Operator: Craig Moffett, Bernstein.

Craig Moffett - Bernstein: Two strategy questions if I could for Glenn please. Glenn, first, can you comment on your WiFi strategy and whether you see it just as an extension of your dress shield broadband product or if at some point down the line, you would anticipate adding an MVNO wireless component, so that you could sell it as a replacement wireless service coupled with that MVNO deal? Then, second, if you could just comment on your strategy with regional sports networks particularly in Los Angeles and how that might affect your thinking about the Dodgers and how that would fit with what you've already done with the Lakers.

Glenn A. Britt - Chairman and CEO: Okay Craig, thanks. WiFi, what we are doing in WiFi right now as Rob talked about is building out extensively in Los Angeles and we do have some presence in New York too, and I think eventually we will have a lot of WiFi in our whole footprint, but our main concentration this year is to go deep in Los Angeles, and we are off to a good start with what we did last year. We see that at the moment as an extension of our wireline WiFi, excuse me, broadband business and it turns out that obviously more and more wireless is about data consumption, and a lot of that is near home. If you think about how you might use your iPad and we think we can make our wideband service even more valuable by building out this WiFi. I would applaud Cablevision having done that early on in New York quite extensively, as you know we are roaming with them. I think that’s where this is going to go. On the second question about regional sports, I think we have been pretty consistent about this. We are – our objective is to stabilize our costs and make it predictable over a lengthy timeframe, knowing that the costs have been escalating rapidly all over the country. So where rights come available as they did with the Lakers, if we think we can buy them for a price that makes sense for us over the long run we’ll do that. I don’t anticipate there is going to be tons of those, most of the sports rights are tied up for many, many years to come, but we’ll look at other things that come up. Obviously, there was a lot of pressure around the sale of the Dodgers, not just in Los Angeles but all over the country. And there – who knows what’s going to happen with the media rights and Fox has certain rights to negotiate, but if those become available and are offered to us, we’ll take a look at it.

Operator: Richard Greenfield, BTIG.

Richard Greenfield - BTIG: Could you just give us a sense of how you're introducing new and existing subscribers to wideband Internet, meaning essentially your marketing strategies for that new product? Then secondly we have written about Apple TV that if it were to be created in some form it would likely leverage a video API supplied by a cable operator. Just wondering, given where you are now with your iPad App and things like that. How hard would it be for Time Warner Cable to offer a video API to a third party like an Apple?

Glenn A. Britt - Chairman and CEO: Let me take the second one and I’ll have Rob do the first one. As we said before our goal is to have our video service on every device that looks like the TV and the rights we have today are mostly in the home or where there is TV everywhere, rights for out of the home. So let us focus in the home. So we want to be in every device, and I think you are going to see a whole variety of different user interfaces. So the app we have on the iPad and now the Android devices are one version of an interface that is different than the one on the set-top boxes and using web services technology we can change it more quickly and be more adaptable to consumer needs. I think consistent with what I just said we would be very open to being a part of other people's user experiences. I don’t want to limit it to any one manufacturer, but if people have devices with great user interfaces we would definitely consider publishing our APIs to them. We are in discussion with a number of different companies about doing just that.

Robert D. Marcus - President and COO: So Rich on wideband, first of all I guess it probably goes without saying that we are very pleased with the wideband performance this quarter. We added 73,000 wideband subs and that’s a mix of both 50x5 subs and 30x5 subs both of which we put in the wideband category. Those subs came both as new connects and also significantly as upgrades from other tiers of broadband service. I guess the specific answer to your question is, we're approaching wideband from two perspectives, one is the messaging. I think one of the things you'll probably noticed in our initial round of Enjoy Better marketing was that we highlighted many of the things that customers really like to do via their broadband connection that are made that much better by virtue of having our higher end services. For example, watching Netflix or other video sources over the Internet or alternatively using online gaming like Call of Duty, which we highlighted in our ads. Even last year when you look back at the promotion we did around buying wideband and getting a Slingbox for free, another example of things that customers might like to do, they take advantage of an even wider pipe. Beyond the messaging though, we're obviously packaging wideband in ways that make it more attractive for our customer. So the principal way is by inclusion in our SignatureHome package and I think of the 73,000 wideband net adds we had this quarter, about 14,000 came in the form of SignatureHome customers, the rest being other cards and we're also running other interesting promotions, coupling wideband with phone. We did a promotion this quarter of Buy Wideband and Get Phone For Free. I think we're going to continue to experience with things to see what strikes the right cord and get the product out in front of our customers. But the truth of the matter is the incremental speed is really – once awareness is achieved, largely selling itself among interested customers.

Richard Greenfield - BTIG: Rob, I'm sorry. You said that you are including both the (55 and 1) what were the other package you are including in that?

Robert D. Marcus - President and COO: There are two tiers of service that we classify in the Wideband realm, because they are enabled by our DOCSIS 3.0 upgrades. So, one is 30/5 we call that Extreme, and the other one is 50/5 and we call that Ultimate. I think the base is roughly two-thirds 30/5 and one-third 50/5 at this point, that's ballpark numbers.

Operator: Jason Bazinet, Citi.

Jason Bazinet - Citi: Just have a question for Mr. Britt. It seems like – and correct me if I'm wrong for the last 10 years or so, most of the PC penetration I guess by household that's sort of been stuck at the sort of 65% to 70% range, which is limited addressable market for broadband. I was just wondering do you think with the adoption of tablets and smartphones that we're sort of on the precipice of unleashing, a broader market definition that could include the last 30% or so with household that don't have a PC?

Glenn A. Britt - Chairman and CEO: Actually, a lot of peoples have spent a lot of time looking at both in the industry and government, and that is the roughly 25% to 30% of the population that is not online. I think there is no sort of short answer to it. There are a lot of different groups and reasons within that category. There is a tendency to immediately and some circles go to price, so it must be too expensive. There certainly are some people in that category and our industry and others are making efforts to reach those. We have a program in this industry that we've announced targeting school (lunch) eligible children for example and there's other things around that. But I'm not even assured that's the biggest group. There is – some number of those people who to-date have not found going online to be useful to them or something they want to make part of their lifestyle. So there's plenty of seniors who are online and it enables them to reach out perhaps they are not as mobile as they used to be. But there is lot of other seniors that are very happy with their lives and they don't see any reason to go online. So I'm not sure that's going to change. There is actually a frighteningly large percentage of world population that is functionally illiterate and I think that's a problem that will impact this. So I could go on and on. The FCC has actually done quite a bit work on this. So it's not going to certainly evaporate the 25% to 30%, but I do think over time as broadband becomes more of a part of the fabric of our society, we'll see it gradually decrease, nothing ever gets to 100, but I think over time, broadband will get close to that.

Operator: Doug Mitchelson, Deutsche Bank.

Douglas Mitchelson - Deutsche Bank: So for Rob, I think you mentioned last quarter that a new CMO onboard, the Company was spending smarter. I'm trying to square the decline in marketing spend with the slower growth in ARPU. Is the more aggressive promotional pricing posture allowing you to spend less on marketing your services or are those two dynamics of pricing strategy and the declining marketing spend unrelated?

Robert D. Marcus - President and COO: Really the decline in marketing spend and I won’t get too hung up on the decline, I think the delta between this Q1 and last is about $5 million and some that has to do with some credits we received from some of our partners. So I think for all intents and purposes we’re spending more or less the same as we did last year. The real point here is we’re spending more effectively and more efficiently. So the shift in spend is that we are spending more on broadcast and frankly on online E-Tel bounties and less on things like print, and radio, and a little bit less in outdoor. So I think the simple answer is we’re just spending our money in my opinion more effectively than we have in the past.

Douglas Mitchelson - Deutsche Bank: If I could follow-up on the ARPU side of the question as you try to flow those forward. Is there anything happening on the retention strategy side that is having a meaningful impact on ARPUs?

Robert D. Marcus - President and COO: Look the reality is we are operating in a competitive marketplace, and on the front-end due to the promotional aggressiveness that that we've executed in order to continue to capture share in this environment customers are coming in at lower ARPU than they previously did. And then on the other end of the spectrum given that our competitors are also aggressively promoting, the ARPUs of existing customers have tended to be somewhat higher than they were previously. So, there is a little bit happening on both ends.

Douglas Mitchelson - Deutsche Bank: Then, so then the point would as those more aggressively promoted to customers are stepping up in year one and year two, are you having any trouble getting the ARPUs up to a reasonable level?

Robert D. Marcus - President and COO: That’s not truly the name of the game and we've been pretty good about rolling customers offer promotions. We spent a lot of energy and focus on it. I will say that one of the techniques we’re implementing here is that our promotions of late have increasingly included value added products and features like DVR, like premiums. And one of the things we’re focused on, which we’ve gotten pretty good early returns on is once we give the customers an opportunity to sample the value-added products the magic of course is to converting them into paying customers, which generates more ARPU out of those incremental services. So far we’re doing pretty well at that. So I think that’s a promising opportunity for us.

Operator: Marci Ryvicker, Wells Fargo.

Marci Ryvicker - Wells Fargo Securities, LLC: You had two events that occurred in the first quarter both impacting New York. The loss of MSG for a period time and then the launch (Aereo). Did you see any impact on subs in the quarter from either of these events and then generally speaking what are your thoughts on (Aereo)?

Glenn A. Britt - Chairman and CEO: Two separate questions. We of course did not have MSG for a while and it did have some impact but I would editorialize and say it had amazingly little impact. In fact usually less than you might have thought reading in the press. So let us just leave that at that. (Aereo), I think is a very interesting idea. I have no idea whether the courts will find it to be legal or not, but it is certainly something we’re looking at. Obviously we have been quite interested in the whole retransmission front. So if it's found to be legal, not paying retransmission consent it's a very interesting thing.

Thomas Robey - SVP, IR: Candy, I think that's probably all we have time for this morning. Thanks to everyone for joining us and to give you a little advanced notice, our next quarterly earnings conference call which will reflect second quarter results will be on Thursday, August 2nd, at 8.30 am Eastern Time. Thanks and have a great day.

Operator: Thank you for participating in today's conference. You may now disconnect.