AOL Time Warner Inc. CEO Gerald Levin deflected questions concerning Comcast
Corp.'s recent bid for AT&T Broadband or his company's possible role in the
proposed merger. But he did say the deal could bode well for the rest of the
cable industry.
In a conference call with analysts to announce its second-quarter financial
results, Levin said the Comcast-AT&T Broadband deal has shed new light on
the value of broadband-cable networks.
'This kind of motion is a very good indication of the undervaluation of the
broadband pipe, or the cable architecture,' Levin said. 'For those who like
cable, this has got to be a real plus.'
AOL Time Warner is indirectly involved in the negotiations through AT&T
Broadband's 25.5 percent interest in Time Warner Entertainment. AT&T Corp.
has been negotiating for months to sell its TWE stake to AOL Time Warner, but
the two sides have been unable to agree on a price.
The TWE stake, as well as AT&T Broadband's 30 percent interest in
Cablevision Systems Corp., could play a role in the negotiations with Comcast.
Comcast has said it could purchase those stakes -- currently not part of the
deal -- to sweeten its offer.
Levin would not comment on any possible negotiations concerning the TWE
stake.
Cable played a significant role in AOL Time Warner's growth in the second
quarter. Revenue at the cable operations -- with about 12.7 million subscribers
-- grew 14 percent to $1.7 billion and cash flow rose 13 percent to $777
million.
Levin said the growth was fueled by the addition of 373,000 digital
subscribers in the period, as well as 226,000 high-speed-data customers. AOL
Time Warner ended the quarter with 2.5 million digital customers and 1.4 million
data subscribers. Local advertising growth at the cable unit was 19 percent in
the period.
At the television networks -- which includes broadcast and cable -- revenue
was up 2 percent and cash flow grew 18 percent to $444 million. Advertising and
commerce revenue at the networks was down 8 percent.
Overall, cash flow grew 20 percent in the quarter to $2.5 billion. Revenue
was $9.2 billion, up 3 percent.
