Time Warner to shed cable?

TW CEO Jeff Bewkes has signalled he is leaning towards a complete spin-off of Time Warner Cable, telling investors a split between the two companies could be beneficial for both. The board has been conducting a formal review into whether and how Time Warner should change its 84 per cent ownership of Time Warner Cable, a separate public company. Bewkes told investors that a decision would be made by the end of April.

“It might be better if it were able to live as a separate ownership position for us as well as for all of you as shareholders,” Bewkes told the Bear Stearns media conference. Time Warner Cable is the second biggest cable operator after Comcast, serving about 14.6 million customers.

Investors have long expected Time Warner to sell down its stake in the cable company to less than 50 per cent. But depressed cable valuations have recently led to some calls for Time Warner to go in the other direction and consider buying back the 16 per cent stake currently in public hands. But Bewkes said it has more to do with issues such as whether Time Warner Cable’s strategic options would be improved “if it was a separate piece of paper you owned, instead of just owning it by necessity with Time Warner.”

Bewkes acknowledged that spinning off the cable business would significantly shrink Time Warner, but he said: “It doesn’t matter whether Time Warner as a conglomerate of holdings is larger or smaller, it just matters whether the return on capital is higher.”

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