Hello, and welcome to the Time Warner Cable Fourth Quarter 2014 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the call over to Mr. Tom Robey, Senior Vice President of Time Warner Cable, Investor Relations. Thank you. You may begin.

Thanks, Candy, and good morning, everyone. Welcome to Time Warner Cable's 2014 Fourth Quarter and Full Year Earnings Conference Call. This morning, we issued a press release detailing our 2014 fourth quarter and full year results. Before we begin, there are several items I need to cover. First, we refer to certain non-GAAP measures. 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 conference call 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 which are discussed in detail in our SEC filings. 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, the quarterly growth rates disclosed on this conference call are on a year-over-year basis, unless otherwise noted as being sequential. Fourth, today's press release, trending schedules, presentation slides, and related reconciliation schedules are available on our Web site at twc.com/investors. And finally, following prepared comments by Rob Marcus and Artie Minson; Rob, Artie, and our Chief Operating Officer, Dinni Jain will be available to answer your questions. With that covered, I'll thank you, and turn the call over to Rob. Rob?

. : In particular, residential customer relationship net adds of 54,000 were the best in any fourth quarter since we went public, and residential triple play net adds of 273,000 were the most in any fourth quarter ever. It was just about a year ago that we laid out our three-year operating and strategic plan for Time Warner Cable. As a core element of that plan, we set out to revitalize our residential business by refocusing on growing our customer base, investing in reliability and customer service, and enhancing our product set. Also key to the plan, we committed to drive continued growth in business services by expanding our network, augmenting our sales force, and increasing productivity. Even with our February agreement to merge with Comcast and all of the associated distractions, our team has stayed 100% committed to the plan. The results show, and I couldn't be prouder of what we've been able to accomplish this past year. Our efforts put us ahead of plan in almost every operational category. For the full year 2014, we added 150,000 residential customer relationships and 373,000 triple plays; a radical turnaround from the past several years. Not only are we ahead of plan from our subscriber perspective, but we are also ahead of schedule on many of our customer experience focused initiatives. We completed our TWC Maxx speed increases in New York City, Los Angeles, and Austin, and our all digital conversion is done in New York and L.A. and in process in Austin. These investments along with investments we've made in new set-top boxes and modems, Wi-Fi hotspots and better reliability and customer service are already having an impact on customer satisfaction. And critically, customers in TWC Maxx markets with our new modems have churn rates that are materially lower than…

Thanks, Rob, and good morning, everyone. Before I get going, I'd like to hit a couple of housekeeping items that are probably pretty obvious, but worth mentioning anyway. As Rob mentioned, we continue to expect the closing of our merger with Comcast will occur early this year. As a result, we're not going to be providing full year guidance today, nor are we announcing an increase to our regular dividend. Those are both things we typically do on our Q4 call, but not appropriate today, given where we stand in the deal process. I'm going to start today by rewinding the call to our fourth quarter 2013earnings call. As you'll recall, we spent a good bit of time walking through our three-year operating and financial plans to revitalize TWC. As Rob indicated in his opening remarks, we're running ahead of that plan operationally. Our residential subscriber metrics are better than expected. Our customer care and tech ops performance is the best in recent memory. Our TWC Maxx rollout is accelerating, and business services continues to be a strong driver of growth. On the financial side, I'm also pleased with our performance, and with the go-forward financial trajectory of the business, albeit of the modestly lower 2014 base. With that, let me turn to the Q4 highlights starting with customer relationships, where we performed very well. On the residential side, we gained 54,000 customer relationships in Q4, and business services, we had a 13,000 CRs. So, on a combined basis we had the best result for a Q4 at least since the time of the Adelphia transaction in 2006. The Q4 residential CR performance was driven by a 7% increase in connects, coupled with a 7% improvement in disconnects. You might recall that back in 2013 we moved to dedicated retention…

Thanks, Artie. Candy, we are ready to begin the Q&A portion of the conference call. We would ask each caller to ask a single question, so that we can accommodate as many callers as time permits. First question, please?

Thank you. Our first question is from Jessica Reif Cohen of Bank of America Merrill Lynch.

Thank you. I hate to not listen to you, Tom, but I have three really small questions. One is, I think, Artie, you mentioned there was a churn declined. Can you quantify how much? And…

Jessica, if you -- I can't hear you, we're having a little bit of trouble hearing you.

Oh, I'm sorry. You mentioned there was a decline in churn. I was wondering if you could say how much. Also, could you give us any guidance for CapEx for 2015? And then finally with the increase in buildings, what is the current addressable SME market?

Sure, I'm not going to be able to help. Despite asking three questions, I'm not sure how much I'm going to be able to help you on any of those. We're not going to breakout CapEx. We're really staying away form any forward-looking guidance for 2015. On the churn, that's really nothing we've ever disclosed, what I will just sort of stick with is the overall comment that we had a very good improvement in connects and disconnects, but you should take away that churn reduction has obviously been a key focus of ours. And your last question on the buildings, we've added -- in our footprint, the addressable market size is, it's a little under 25 billion.

Okay, thank you.

Thanks, Jessica. Next question, please.

Thank you. Next question is John Hodulik with UBS.

Okay, thanks. Guys, on the call AT&T announced a new strategy as it relates to U-Verse that they are pulling back on focus on sub growth, just focusing on higher end sales. And as a result, in the fourth quarter they added far fewer subs than they did last year. I think that took place through the quarter. Do you guys -- I guess I have two questions; one, do you guys think that had any impact on -- are you seeing a change in the completive environment as a result of that? Did it affect the strength that you saw especially in December, where I think you said you went positive? And then, if you could -- if you know, give us a sense on where your overlap with the U-Verse footprint stands at this point given their recent build up. Thanks.

Yes, John, I can take both of those. It's Rob. Overlapped with U-Verse is about 26% of our footprint today. For good measure I'll throw in that we're about 14% overlap by FiOS. As far as your overall question as to what the impact of AT&T strategy was on our performance, it's hard to attribute our out-performance to any one factor. We did do well in U-Verse markets. We did well in FiOS markets for that matter too. We grew connects in both FiOS and U-Verse markets, and in fact our disconnect reduction in FiOs and U-Verse markets was better than non-FiOS and U-Verse markets. So beyond that, I'm not sure I can be more specific in addressing your particular question.

That's great. Thanks, Rob.

Thanks, John. Next question, please.

Thank you. Next question is Phil Cusick with J.P. Morgan.

Hey, guys, thanks. Nice job on subs. I did notice though that ARPU trended a little lower than we expected. Is this just because of bringing on a lot of new subs on promotion? Is it a higher hit from retention, or is it about ramping people up less quickly as they come off contract? Recognizing that you aren't giving guidance, should we look for ARPU to grow more slowly this year given the focus on subscribers? Thanks.

Hey, Phil, it's Artie. I can take that one. Couple of things I would just point out in ARPU; one is, as we move to a new offer in Q4 that had a free installation, if you combine the free installation impact and as well as lower pay preview events what we would sort of call non-recurring ARPU, those had an impact in actually what we sort of refer to as monthly recurring ARPU. That was actually up slightly. The other item I'd just sort of point out when you think about ARPU, you will recall when that this year in '14 was the first year we moved to what we call, "Unified Rate Strategy," meaning that no matter what sort of bundle you are in, whether you're double play, triple play, you receive one rate increase a year. That's different in costs comparison to '13 when we were doing more product rate increases meaning if you were a double or triple you could actually get multiple rate increases throughout the year. So that obviously has a skewing impact on ARPU growth. What I would point out to you is we're basically getting right into in '15 -- the rollout of our 15 rate increases, so you should expect a step-up in ARPU from rates and fees that we will be implementing. You'll get partial quarter impact of adding Q1 and a full quarter impact in Q2.

Thanks, Artie.

Thanks, Phil. Next question, please.

Thank you. Next question is Ben Swinburne with Morgan Stanley.

Another attempt at guidance even though we're not supposed to ask about it, but Rob, you said in December that you thought you guys would add video subs in 2015. I just wanted to see given the fourth quarter results I'm guessing you still feel confident, but I wanted to check. Then Artie, could you size those one-time expenses in Q4 just so we can understand the variance versus your expectations, the one-timers you called out?

Sure.

So Ben, our plan continues to be to grow video subs in 2015.

Great.

And Ben on the expense front, I'd say the aggregate of good guys we thought we were going to get on the expense side and some bad guys that we had not forecasted; they were in about the $25 million range.

Okay, great. Thank you.

Thanks, Ben. Next question, please.

Thank you. Next question is Laura Martin with Needham & Company.

Yes, Rob, I want to borrow some of your IQ on two big strategic questions. First is, I'm very interested in your commentary around Sling TV, and whether you think you guys would offer a similar bundle from those content same guys. Then, for the purposes of my second question assumptions, assume the Comcast deal doesn't close in 2015 or 2016. Talk about net neutrality, and how you're thinking about the investment if we get the net neutrality version that Chairman Wheeler's been talking about and ultimately and then litigation immediately after, and that uncertainty and how it would affect your investment in the last mile. Thanks.

Sure, first of all, in Sling TV, we've been advocates of flexible video packages for quite some time. I think Sling TV is a variation on that theme with only 12 -- I believe 12 networks, select networks from I think three providers or four providers for a relatively low price. I think it's intriguing in the sense that it reflects a willingness of programmers to deviate from the big bundle packages that we are generally offered. In terms of the attractiveness of Sling TV itself, I'm a little bit skeptical in that. I think we've got a more compelling like if you will bundle that's happens to be called our starter video product basic table for about the same price, but with many more highly rated networks. So I think we'll watch and we're certainly interested in more flexible packages. But I'm not sure if that's the right one.

In terms of net neutrality, I'd rather answer your question not in terms of why has the Comcast deal doesn't close because we remain confident that it will. But I will talk generally about net neutrality. I think at this point I don't have any greater knowledge of exactly what's going to come out of the FCC then you probably do if we read chairman Wheelers recent statements. It appears that they're going down a title two with four bearings path. But the exact contours of that I think remains to be seen and the impact that anything they come up with will have on our future investment or willingness to invest. I think will impart depend on the detail. I think it's a -- it almost goes without saying that to the extend what they proper creates uncertainty around the regulatory regime and which we will be operating that is likely to chill our enthusiasm for investment but beyond that general statement, it's hard to say more.

Thank you. That's…

Thanks, Laura. Next question, please.

Thank you. Next question is Mike McCormack with Jefferies.

Hi, guys. Thanks. I know you mentioned that you don't want to talk about 2015 guidance at all, but thinking about capital intensity if you look at the current year versus the prior year, the nice turnaround in subs. Thinking long-term capital intensity, what would be the view around that? Then if you don't mind, on voice additions, obviously very strong, I'm just trying to get a sense for whether pricing was a tool there, whether that was used for triple play uptake? Just any thoughts on why voice was so strong?

Let me fend off yet another attempt at getting guidance. On CapEx, the only thing we're going to say is that we've obviously invested aggressively in our plant reliability and our customer premises equipment in 2014, and our plan is to continue to do that in '15 as we rollout Maxx to more markets and continue to improve the customer experience. But we're not going to say anything more about specifics on capital. Dinni, you want to tackle the phone question?

Yes, I think Mike that as Artie has been saying we've done a lot of work in the last couple of years in terms of reducing our cost base in phones. And so we feel really good about that. We're adding a lot more triple plays as you surmised, and phone is being brought along in those triple plays at rates [technical difficulty] that we have not ever seen before. So I think -- and the only other thing I would add is the double to triple migration, we're also seeing there a nice step-up in revenue from phone. We can probably be frankly little bit more aggressive than we've been in the past, given how we produce the cost structure, but we are still getting a nice step-up there as well.

I'm not sure we mentioned it, but we've been promoting a $10 both on phone offer for existing customers. We've had some pretty good success with that.

That's what I was trying to get at. Is phone that attractive as, not a toss-in, but a relatively cheaper throw-on for the bundle that makes you differentiated versus the competitors out there?

Yes, I think as we've mentioned too, this year we added free calls to Mexico and then more recently free call to China, and Hong Kong. And those the being targeted against demographic groups that find really high value in that.

What's interesting is that a reasonable share of the phone, net adds that we had, meaning they're both on $10 phone net adds, were previous voice code cutters, in other words, wireless-only. So I think we struck an offer that's actually interesting enough to pick up some of customers that we had previously lost when the prices were higher.

That's great, thanks, guys.

Thanks, Mike. Next question please, Candy?

Thank you. Next question is from Marci Ryvicker with Wells Fargo.

Good morning. This is actually Stephan Bisson for Marci. You guys have a very extensive, robust Wi-Fi network and recently some other operators have talked about monetizing it in a different way. Do have any plans for a similar monetization or that product or something different, whether it would be voice-based or charging for it?

Stephan, we're huge proponents of Wi-Fi. We've been building out our Wi-Fi network for some time, and with the benefit of our consortium with other cable operators, we have what I think is the largest national Wi-Fi network available to our customers of any provider. And to-date, we've used that as a value-add to our high-speed data product, but I think that's really just the beginning in the idea of utilizing Wi-Fi as a component of the voice offering is pretty intriguing. So I assume what you're referring to is the announcement the Cable Vision made earlier this week, and it's pretty intriguing to us. We actually implemented a somewhat similar strategy when we had our MVNO arrangement with Clearwire. In that, we offered a small bundle of data. It wasn't a voice product, but it was a Wi-Fi first data offering within an MVNO cellular backup. In theory, as the technology for voice-over-Wi-Fi continues to improve, it's theoretically interesting to think about a variation on what Cable Vision is doing. So we're going to watch that and see what the uptick is. I'm not sure that they struck exactly the right court in terms of the match between price and the absence of a cellular back up. But I think it's pretty cool.

Great, thanks a lot.

Thank you. Our next question is Craig Moffett, MoffettNathanson.

Hi, guys. I'm going to see if I can slip in two questions, if I could. First, maybe in light of the expected Title II offering or Title II order coming from the FCC, can you talk about your latest thinking on usage-based pricing and whether you think usage-based pricing is actually more likely under Title II, and what implications the regulatory environment might have for that? Then second, let's change the topic from, if the deal doesn't happen to if it does. Assuming it does, can you talk about what you've learned about the migration of programming rate cards for the various subscribers that are going to be swapped one way or the other? How much of the subscriber base can be swapped onto lower rate cards, and how quickly?

So the implication –- in terms of the implications of the Title II for usage based pricing, I'd really say that I don't think it has much impact at all. As you guys know, we offer usage based tiers and I think the ultimate success of usage based pricing will be depended on customer uptake and the interest in availing -- customers' interest in availing themselves of a usage based tier versus unlimited tier. The reason I don't think title two has much of an impact is that today, the types of rules that are being talked about to ensure an open internet are wholly consistent with our behaviors and wholly consistent with the rest of the ISP industries behaviors. So I don't anything is going to change on that front. And usage-based pricing doesn't seem to be a target of any regulations at this point. So I think that will continue to be something thing that may evolve with the market. In terms of programming questions and post deal application of Comcast deal versus our deal, I don't think we have anything to add to what's already been discussed in. it's probably a conversation that's better had with Comcast to the extend you want to have it.

Thank you.

Thanks, Craig. Candy, next question please.

Thank you. Next question is James Ratcliffe with Buckingham Research Group.

Good morning. Thanks for taking the question, two, if I could as well. First of all, on the Businesses Services front can you give any color on the impact that the expanded footprint actually had on the revenue growth? I noticed you ticked up sequentially in the growth rate in Q4. How much of this is expanding the penetration of existing base, and how much of it is growing into the 8% of base, so that you added? Just an idea of how much of a percent you think you can continue to penetrate over time. Secondly, the marketing strategy on triple play as, Rob, you mentioned the $10 add-in, is this an overall shift toward more marketing triple play? How much of this is just Q4 different sorts of addressable customers versus the college students in 3Q? Thanks.

All right, let me start on the business services and then Dinni will pick the triple plate and Artie may be throw in on the business service question as well. Our plan in 2014 was to expand our addressable or serviceable business services revenues opportunity by about $1.2 billion. I think the buildings we connected ended up yielding just about that. But that's sort of the actual revenue implications of those kinds of bills or lagging. So what you saw in 2014 in terms of revenue growth was really a product of prior investment as well as continues growth and our sales force and productivity within the sales force. So I think 2014s investment will ultimately yield fruit in '15, '16 and so on. You want to add to that Artie?

No, nothing to add.

In terms of the triple plates I think everything that we're doing right now, we're still seeing through a lens of how do we build trust with our customers. And through most of 2014 we had a $79 triple play offer that was out there. But Q4 what we really did was focused on making sure that the package delivered only elements that were necessary to enjoy the package without this perception of hidden see. So one other thing we did as we moved the price from 79, 99 to $89 and we added a set top box to it. And then, we also as Artie mentioned, made a free install for triple play. I think you know there were a couple of others whose -- that was the core of the change that we made for Q4. And you know we really feel good about not just the results of it but also about you know the entering position with the relationship with the customer. And building trust during the course of the whole year. A couple of other things that we have said about the triple play is that -- we didn't want to have premiums attached to it that expired after three months or six months. We wanted to keep everything in that 12 month range and we also didn't want to have rate increases that would affect those customers within the first 12 months. So that's you know our -- our overall triple play strategy and it reflects some minor incremental changes but not being tremendous.

Great, thank you.

Next question please.

Thank you. Next question is Vijay Jayant with ISI.

Thank you. It's David Joyce for Vijay. Great subscriber numbers here in the quarter. How confident are you that you won't have the experience that you did a year ago or so when customers are moved up to full freight pricing? What might be different this time in terms of managing the churn? Secondly, what did any skinny packages contribute in the quarter? Thank you.

So I think with regards to your first question, I think I have partially answered it in my previous answer which is to say that in the past when some Triple Play offers were put up there with too many promotional discounts when the discounts expired, the perception of the price increase was much bigger. Since we didn't add many of those elements to our current triple play package, we're not going to have that -- that affect at the end of the 12 month period. So I think we feel really about how this package will perform when you know the promotional period and at the end of the 12 months.

And David, what I would just say is in your question on skinny packages what I would point you to back to my proactive remarks where you know triple play can act so basically doubled over the last year and I think one of the things of the new offer is its -- its very clear to our customers and it's very clear frankly to our sales agents of what it is we're selling. So we have got the most pick up in selling the triple play offer which was what we intended when we launched it.

Great, thank you.

Thank you. Next question please, Candy.

Thank you. Our next question is Tom Eagan with Telsey Advisory Group.

Super, thank you. With the upcoming launch of HBO over-the-top, could you give us any updated thoughts you have on the impact on your customers? Thank you.

I think it remains to be seen but you know we're going to continue to sell premium services and you know I don't anticipate it having a meaningful impact.

Great, thank you.

Thanks, Tom. Next question please.

Thank you. Next question is Jonathan Chaplin with New Street Research.

Thanks. Two quick ones, I noticed there's a decent overlap between the new markets that you've announced for Maxx and pending Google Fiber markets. I'm just wondering how Google moving into Fiber impacting your decision on markets that you rollout, but also how it impacts the sense of urgency you have around rolling out a Wi-Fi first, voice offerings, given that Google seems to be moving in that direction as well? Then a second question quickly on, if the FCC goes ahead and redefines broadband at 25 megabits per second, how do you think that impacts the calculus of the DOJ on the deal if at all? Thank you?

Let me start with your last question, I think that the notion of defining broadband at 25 megabytes per second is somewhat arbitrary am not really sure what that is intended to mean. And really I don't anticipate that that has any practical implications for -- for life going forward or for the DOJ's analysis of the deal. In terms of Maxx as we said when we first articulated our three-year plan, our aim is to have 75% of our footprint enabled with Maxx attributed by the end of the three-year plan period. And my guess is we're continuing to roll it out beyond that. So the only question is prioritization, and obviously as we think about where to go first, competitive dynamics are a factor. So that includes Google, although it's not explosively dictated by where Google decides to go. In fact I think we announced the Carolinas before Google did their announcement this week. So competitors are certainly relevant obviously. In terms of urgency around the Wi-Fi first offering, as I said earlier, I think Wi-Fi first voice product is interesting, but we don't have any specific launch plans at this time. So something we are continuing to think about.

Got it, thank you.

Thanks, Jonathan. Next question please, Candy.

Thank you. Next question is Frank Louthan with Raymond James.

Great, thank you. Within the CapEx budget for next year, can you give us an idea of the priorities? How much is it outside plan or expansion of some of the Maxx versus success-based CapEx, and capitalizing more your investment has been? Just give us an idea of where the priorities are for the mix?

Sure, Frank. I would say there is no real change from what our priorities were, frankly, in '14. I think you'll continue to see us invest in our infrastructure around Maxx. You will continue to see us deploy new equipment. You will continue to see us continue to add buildings to our footprint for business services. So where are the priorities, remain the same.

Right. So the breakdown would look very similar to what it was in 2014 across the different lines?

That would be my expectation.

All right, thank you.

Thanks, Frank. Candy, next question please.

Thank you. Next question is Matthew Harrigan with Wunderlich.

Thank you. With the fracturing of media and everything happening on the M2M side even, it feels like your set-top box data has a lot more value than it did before. Can you talk about ways to monetize that in concert with partners or even by yourself? I know it's a little conjectural, but I'd be interested to get your thoughts.

Yes. There is no question it is a tremendous amount of value in the set-top box data we collect. We are already using that in our ad sales business had been for some time compliant with privacy laws of course. And it also informs the way we make decisions about programming we carry and the way we carry it. So we are already utilizing it for our own business, whether there are opportunities to monetize that with third-parties is something that we've spent a lot of time deliberating on. There are obviously countervailing considerations because we want to make sure that it's not used in ways that are either inconsistent with the law or inconsistent with our business priorities. So there is no question there is value in the asset, but we are not in a position right now to announce any particular monetization plans away from using it to enhance our own business.

Congratulations on the quarter.

Thank you.

Thanks, Matt. Candy, I think we have time for one more question if there is anyone in the queue.

Thank you. We have Tuna Amobi with S&P Capital IQ.

Hi. Thanks a lot for taking the question and squeezing me in. I guess, Rob, with regard to your outlook for the integration of Comcast, can you give a sense of what's your timeframe after the deal closes? What you are currently doing, what you cannot do, and give us a sense of your plans for that? Also related to that, when you think about margins between Time Warner Cable and Comcast couple or so hundred point differential, where do you see the biggest opportunities post merger to narrow that gap within Time Warner Cable? Thank you.

Tuna, I'm not sure I can add much to what Comcast has already said on this front. Obviously the ultimate responsibility for integration although we are certainly working with Comcast and for that matter and planning for integration today, the responsibility for truly integrating the two companies will arrive with Comcast and try to respectively. So probably best to ask them on exactly what the timeframe is. At the outset of the -- at the announcement of the transaction, we jointly focused on an opportunity to create $1.5 billion of cost synergies, and I think Comcast has reiterated it's confidence in those numbers since that date. Those opportunities come from elimination of duplicative functions, probably more than anything else. So I'm not sure that there is much for me to add to that. It's really a Comcast question.

Margins opportunity?

Embedded in that synergy statement is an improvement in the overall margins of Time Warner Cable and the combined company.

Okay, that's helpful. Lastly real quick, I know you're running out of time, but housekeeping on the Maxx rollout. Are you seeing any connection between TWC app usage and the Maxx rollout in the markets where they're already launched, or are they totally independent?

It's a great question. As best I can tell, it seems to be totally independent.

Thank you.

Thank you, Tuna. And thank you all for joining us this morning. Have a great day.

Thank you for your participation. That does conclude today's conference. You may disconnect at this time.