Time Warner Cable Inc (TWC), Google Inc (GOOG), Comcast Corporation (CMCSA) – Investing in Content Delivery: Part Two

Time Warner Cable Inc (NYSE:TWC)Time Warner Cable Inc (NYSE:TWC) is the second largest cable company in the US, and is looking to differentiate itself from being just another cable company. Time Warner Cable Inc (NYSE:TWC) has taken initiatives to broaden the services that it offers to its customers like access to Wi-Fi throughout New York City.

Total capital expenditures in the first half totaled $1.6 billion, consistent with the company’s plans for full-year capital spending of $3.2 billion. This CapEx spending includes upgrading existing customers to faster speeds and working to create a seamless Wi-Fi network throughout New York City. This would mean that New Yorkers would be able to stay connected to a wireless network anywhere they go in the city near one of the 19,000 access points.

Time Warner Cable Inc (NYSE:TWC)’s earnings increased by 14.2% to $1.69 per share this quarter. Time Warner Cable Inc (NYSE:TWC) also had free cash flow of $732 million and paid out $191 million to support a dividend of 2.2%. Time Warner Cable Inc (NYSE:TWC) also repurchased $638 million worth of shares, which reduced share count from 315 million to 293 million year over year. Since free cash flow was less than what the company spent in shareholder remuneration, that means that the company did take on some debt to reward its shareholders.

Move over ISPs

Google Inc (NASDAQ:GOOG) continues to grow its search business while also venturing into other areas of the Internet. In 2011, Google Inc (NASDAQ:GOOG) announced that it would build a fiber optic network featuring speeds of 1 Gigabit per second, 100 times faster than the average American’s Internet speed. Since then, Google has plans underway to serve three other cities with this blazing Internet speed.

Google Inc (NASDAQ:GOOG) is not necessarily looking to enter the ISP business, but to create a new standard of Internet access. Google Inc (NASDAQ:GOOG) continues to to make nearly 95% of its revenue and profit from paid advertising. Google made $13.1 billion from advertising this quarter, the next biggest division at Google is Motorola Mobility coming in at $998 million last quarter.

Google Inc (NASDAQ:GOOG) saw an increase in revenue of 19% on increased mobile revenue and a 15% increase in revenue at Motorola Mobility. The company also saw an increase in earnings going from $8.42 to $9.54 per share in earnings. Google will continue to be at the mercy of the paid advertising market unless it can diversify some of its revenue stream into things like providing fiber optic Internet.

A different kind of model

Time Warner Cable Inc (NYSE:TWC) is still clinging on to the paid TV model, but continues to diversify itself. Google Inc (NASDAQ:GOOG)’s future is tied to the advertising industry and becoming an ISP and TV Network provider is just a side job.

Comcast Corporation (NASDAQ:CMCSA) is a media conglomerate that is involved in the production, and distribution of communication and entertainment products and services. Comcast Corporation (NASDAQ:CMCSA) has its stable broadband and cable distribution networks providing relatively stable income, and also produces its own original content, making it more vertically integrated than a competitor like Charter Communications.

Comcast Corporation (NASDAQ:CMCSA) currently pays out 30% of its earnings to support a dividend of 1.7%. This company saw revenue increase 7% year-over-year and earnings grow by 30% in the most recent quarter. Part of this growth is due to the NBC Universal acquisition that it completed this past year. Comcast saw growth across the board with net customer additions and revenue per customer growing by increasing the services provided.

Comcast’s Cable Network division accounts for 40% of revenue and 72% of Comcast’s operating profits. With the soaring amount of revenue coming in from advertisers this year, Comcast Corporation (NASDAQ:CMCSA)’s original content can charge more for each advertisement slot. The other great strength Comcast has is that its cable network competitors have to pay Comcast to carry NBC’s content, which is a great position to be in.

Looking forward, Comcast Corporation (NASDAQ:CMCSA) will continue to derive a higher percentage of its profits from NBC Universal as the cable and Internet network divisions see competition heat up from other providers and telecom companies. However, Comcast has hedged its bets by purchasing a property that produces content. This will pay off in spades for Comcast shareholders.

Foolish bottom line

Cable companies are competing to provide a good that is becoming commoditized and will continue to see shrinking margins. However, companies like Time Warner Cable Inc (NYSE:TWC) and Google are using ISP networks to add value for their customers. Google is using its Fiber network to drive more Internet traffic and, ultimately, searches. Time Warner Cable is using it’s new Wi-Fi networks to keep customers locked in and drive revenue growth by being differentiated.

Comcast Corporation (NASDAQ:CMCSA) is able to provide content to its end users while also competing in the cable and Internet provider space. It pays a modest dividend and has built a wide moat around itself while diversifying its revenue streams. Comcast receives two thumbs up if you are an investor looking to become a shareholder in a cable and Internet service provider.

The article Investing in Content Delivery: Part 2 originally appeared on Fool.com and is written by Wes Patoka.

Wes Patoka owns shares of Google. Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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