Image source: Time Warner Cable


Time Warner Cable delivered another very good quarter. Subs were strong, ARPU growth accelerated, and we made terrific progress on our strategic and operating initiatives. In short, we're delivering on the plan that we laid out back in January and I feel very good about the business.
-- Time Warner Cable CEO Robert Marcus

Time Warner Cable (UNKNOWN:TWC.DL) posted a strong second quarter for investors, and the above quote from CEO Robert Marcus on the conference call pretty well sums that up. This marks the fourth quarter in a row of rising revenue for the company, with year-over-year revenue growth of 3.2%. Adjusted earnings per share increased 11.8% year over year to $1.89. Even though EPS came in just below expectations, revenue increases in business services, as well as higher average revenue per user, or ARPU, this quarter show that the company is operating well on both the business and residential sides of its business.

While the company has shown a strong Q2, there are other important items for investors to now consider, such as the company's proposed merger with Comcast (NASDAQ:CMCSA), which would effectively convert all shares of Time Warner Cable to shares of Comcast. Here are a few more quotes from management on the call that will highlight how this company looks for investors now.

Build it, and they will come

On the broadband side, we now have TWC Maxx speeds of up to 300 megabits a second available to hundreds of thousands of customers. We expect to reach 3 million customers by year end.

Better video and faster speed should make customers happy. Image source: TWC

Time Warner Cable Maxx is a program that provides all-digital video and Internet services to customers, with technology and infrastructure that allows for much better speed and reliability, increased channel options, and other added features. It launched earlier this year in Los Angeles and New York and the company announced an expansion to the Austin, Texas, area last month. But this is just the start.

Now, the company is planning to add at least seven new markets through 2015: Charlotte, N.C.; Dallas; Hawaii; Kansas City, Mo.; Raleigh, N.C.; San Antonio; and San Diego. The company warns that the operational and implementation costs of doing so will show in the company's bottom line in the coming few quarters, but that long term, being able to offer the most advanced service in the industry will be a boost for the company's customers and shareholders.

Marcus says that by the time this next phase of Maxx is rolled out, the service will be available to roughly 6 million customers. These increased services and top-of-the-line speed and quality are driving customers to choose Time Warner Cable. Subscriptions are up this year and increasing steadily.

This quarter, we built on subscriber momentum that really began at the end of last year. And after a first quarter that marked our best subscriber performance in many years, our second-quarter subscriber performance was nearly as impressive. In fact, it was our best second quarter in four years.

The company added 67,000 broadband Internet customers during the quarter, and while this is below the increase of 269,000 new broadband customer relationships, or CRs, added in Q1, this growth in Q2 is still the best the company has seen for a Q2 performance in four years. Another important note is that on the business services side, 21,000 new business customer relationships were added, which, according to  company CFO Arthur Minson is "the best quarterly CR performance ever for business services."

Image source: Comcast

Wildcard: The proposed merger and what it means for investors

Time Warner Cable and Comcast announced in February that they have entered into a definitive merger agreement in which the companies would combine under the Comcast name. If the merger is successful, all shares of Time Warner Cable will then be converted to shares of CMCSA.

As reported by the two companies, the agreement is a friendly one, and each share of TWC will be exchanged for 2.875 shares of CMCSA, which at a current CMCSA price near $55 would mean about $157 per share of TWC that investors hold, ahead of the TWC current price of $148 per share.

Image source: Comcast

Therefore, if the merger goes through, this could be a good thing for current Time Warner Cable investors as of current share prices. For Time Warner Cable investors, their total share value, if prices were to remain the same as now, would be higher after the merger, and as an added bonus, those immediate gains will be tax free. If TWC shares appreciate and Comcast shares do not however, there could be a loss in value during the conversion. Yet, that doesn't seem likely as Comcast is also performing well right now, and as February Comcast press release announcing the merger stated,, approximately $1.5 billion in efficiencies and cost savings will be added to Comcast's operations from this merger, as well as better technology, which will drive more growth and value going forward. Because of that, the new Comcast will be a much stronger one than the current Comcast, and that will likely grow profits and share value for investors who stick with it for the long term.

"Since announcing the deal," Marcus said in the conference call, "we have been steadfast in our commitment to running the business as if we were running it for the long haul." This is an important comment from Time Warner Cable's CEO because it shows that regardless of the planned Comcast merger, Time Warner Cable is still committed to operating for the long-term in case the deal doesn't go through.

Foolish final thought: Is it time to buy Time Warner Cable?
Time Warner Cable posted a solid Q2 earnings; even though it delivered slightly below earnings expectations, the company still shows continued trends of rising revenues and growing customer subscriptions, and is implementing better technology for its customers, which will drive long-term growth. On its own, the company looks operationally solid right now.

For those investors willing to stay through the transition, investing in Time Warner Cable through the Comcast merger could drive share value growth, some of which will be tax-free. While the company is very excited for the merger with Comcast and is planning for its success, if it doesn't go through, Time Warner Cable still looks like a strong company. It will likely be another six months at least until investors get more solid information on whether the government will allow the merger to go through, which means at least two more quarters of Time Warner Cable growth, and that's a good thing.