Time Warner Cable said last Friday that three top executives will be leaving the company — two of them after an internal review recommended combining what had been split president and COO positions.
The company downplayed the significance of the departures, which also include the cable operation’s chief marketer. But others in the cable community called them unusual, especially as the second-biggest U.S. operator has teamed with the biggest one (Comcast Corp.) on a potential bid for Adelphia Communications Corp. and its 5.2 million customers.
Time Warner also is embarking on a 31-market rollout of a key new business line — Internet-based digital phone service.
One Wall Street analyst called it “incredibly strange timing,” a stance Time Warner disputed.
Company management disclosed on Jan. 14 that vice chairman and chief operating officer John Billock and president Tom Baxter have both agreed to take early retirement.
Baxter will leave in March, while Billock will remain until a new president and COO is named.
In what the company called an unrelated move, executive vice president and chief marketing officer Chuck Ellis has resigned from that position, also effective in March.
Time Warner chairman and CEO Glenn Britt will remain in his current position.
“Our business is changing pretty rapidly, and this is true of the whole industry, not just Time Warner Cable,” Britt said in an interview last Friday. “That means periodically, you’re going to look at whether you’re organized properly. We had a review and in the case of John and Tom, with their participation, we decided that we were in too many layers. Since their contracts were up in 2006, they just moved it a year earlier.”
Adelphia, which put itself on the block in April, is expected to attract prices ranging from $17 billion to $20 billion for its 5.2 million subscribers. Time Warner and Comcast have said publicly they are evaluating a joint bid for Adelphia, and are considered the front-runner by cable observers. Final bids are due by the end of the month.
“I find this incredibly strange timing,” said Fulcrum Global Partners cable analyst Richard Greenfield. “They’re right in the middle of an acquisition of a major company. While I don’t know how much these three individuals were involved in the Adelphia acquisition process, essentially Baxter and Billock, between the two of them, were the COOs of this company.
“So now you’re going into a major acquisition process and evaluating this without either of those two executives. Sounds pretty strange to me.”
Greenfield cited the importance of Comcast COO Steve Burke’s involvement in the planning and execution of its AT&T Broadband acquisition. “It [the COO] is an important role, and it’s odd to have it vacant just as you’re about to launch a bid,” Greenfield said.
Ellis’s departure was considered to be equally strange, in that Time Warner Cable seems willing to lose its marketing chief just as it is ratcheting up a nationwide rollout of its Internet-based telephone service.
Time Warner Cable, which spent most of last year rolling the product out in all 31 markets, has said in the past that 2005 would be the year the company markets phone aggressively.
Britt, though, said the decision would have no effect on either the Adelphia process or the marketing of the voice product.
“The reality is, we have 32,000 employees at Time Warner Cable,” Britt said. “John is staying for awhile, and we have an enormously deep, experienced management staff who have been evaluating Adelphia. You should not think that those two guys were out looking at headends and things. That’s not how this works.”
Britt said the same for the voice marketing initiative.
“We have enormously deep management that is going to keep doing what we’re doing. There aren’t just one or two people that make a whole company. I don’t think we’re going to miss a beat.”
Britt would not give a time frame for when replacements would be named, but said a search is ongoing.
Analyst Greenfield said Time Warner could announce a replacement that more than satisfies Wall Street, but the company isn’t coming forward with any additional information yet.
“Maybe there is something coming next week that we’re all going to say, 'That was a brilliant idea,’” Greenfield said. “We don’t have any information about who’s going to be hired, and the company is obviously not commenting. In isolation, this fact would seem to make an Adelphia bid riskier, unless filled with executives we feel comfortable with.”
Baxter and Billock joined Time Warner Cable in October 2001, shortly after former Time Warner Cable chairman Joseph Collins left to take over AOL Time Warner Interactive Video as chairman and CEO, where he oversaw development of the company’s MystroTV on-demand programming project.
Collins retired at the end of 2003, after Time Warner Cable absorbed the MystroTV operation.
Billock’s appointment was a significant strategy shift for Time Warner, as it appointed an executive with a marketing and programming background to oversee a cable operation. He’d helped to make Home Box Office a household name when he oversaw marketing at the industry’s first pay channel in the early 1980s. He moved up the ranks at the premium network, and was eventually promoted to president of HBO’s U.S. Network Group.
Baxter had been president of Comcast Corp.’s cable operations from 1990 to 1998, when he left that company to join investment firm Evercore Partners. He also served as CEO of Internet startup Audible Inc.
At Time Warner Cable, Baxter was in charge of the MSO’s systems, with five divisional executive vice presidents reporting to him.
Steve Donohue contributed to this report.
