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Time Warner delays cable play

The media giant puts off buying its stake in a cable joint venture with Comcast--despite continued hints that it wants to expand in the business.

Time Warner has put off buying its stake in a cable joint venture with Comcast, despite continued hints that it wants to expand in the business.

The media and entertainment giant does not yet have plans to either buy or sell Comcast's share in a cable system in the Kansas City, Mo., region, according to a regulatory filing. The company has had the option to buy out the Comcast stake since Aug. 31. A second joint venture in Texas will be available Dec. 31. In both of these deals, Time Warner can buy Comcast's 50 percent stake in the systems and fully integrate them into Time Warner Cable, the nation's second-largest cable system.

Time Warner executives have publicly indicated their intention to make the company a bigger cable player and have hinted at buying out these two joint ventures, but their designs haven't yet come to fruition.

"To the extent that any of these cable systems are contiguous with Time Warner Cable systems, then they could definitely make sense for Time Warner," said David Joyce, an analyst at Guzman & Co. Joyce expects Time Warner to buy out Comcast's stakes within the next six months.

The Kansas City system has around 300,000 basic subscribers, while the Texas system has 1.2 million. The combined systems are valued at about $5 billion.

Time Warner CEO Dick Parsons said during his company's earnings call in October that the media giant will first concentrate on resolving the ownership of these two joint ventures. Then, Parsons said, the company will focus on changing Comcast's 21 percent ownership of Time Warner Cable.

"We're having very productive discussions with" Comcast, Parsons said during the call. "Those discussions are ongoing."

A Time Warner representative declined to comment and instead referred to Parsons' comments. Comcast declined to comment.

Cable continues to shine as a business in Time Warner's vast empire of assets. Last month, the company reported that its cable operating income rose 6 percent from last year on a 10 percent jump in sales. However, cable broadband subscriber growth slowed, despite the 190,000 new subscribers that were added during the quarter ending Sept. 30. The company blamed the slowdown on a maturing market for broadband.

Still, there are significant hurdles that Time Warner must surpass before it expands, analysts said. Federal investigations into accounting irregularities at the company continue to linger. Meanwhile, the company faces a mountain of debt and will devote much of its energy to improving its credit rating by shedding businesses such as its Warner Music Group and its sports teams.

Time Warner is still considering an initial public offering of its cable assets, which was originally scheduled for the summer but delayed due to the investigations. A public offering could help pay off debt and provide capital to acquire bigger cable networks.

As for the Kansas City and Texas systems, analysts said the holdup could be the result of negotiations for an adequate deal.

"These are two small deals that (Time Warner) could close without affecting its balance sheet," said Youssef Squali, an analyst at First Albany.