1377013--2/23/2007--TIME_WARNER_CABLE

related topics

{capital, credit, financial}

{system, service, information}

{regulation, change, law}

{product, market, service}

{property, intellectual, protect}

{product, candidate, development}

{debt, indebtedness, cash}

{acquisition, growth, future}

{loss, insurance, financial}

{stock, price, share}

{competitive, industry, competition}

{tax, income, asset}

TWC operates its cable systems under franchises that are non-exclusive. State and local franchising authorities can grant additional franchises and foster additional competition. TWC faces risks relating to competition for the leisure and entertainment time of audiences, which has intensified in part due to advances in technology. Significant increases in the use of bandwidth-intensive Internet-based services could increase TWC s costs. TWC s competitive position could suffer if TWC is unable to develop a compelling wireless offering. Additional Risks of TWC s Operations TWC s business is characterized by rapid technological change, and if TWC does not respond appropriately to technological changes, its competitive position may be harmed. TWC faces certain challenges relating to the integration of the systems acquired in the Transactions into its existing systems and TWC may not realize the anticipated benefits of the Transactions. TWC faces risks inherent to its voice services business. TWC s ability to attract new basic video subscribers is dependent in part on growth in new housing in its service areas. TWC relies on network and information systems and other technology, and a disruption or failure of such networks, systems or technology as a result of computer viruses, misappropriation of data or other malfeasance, as well as outages, natural disasters, accidental releases of information or similar events, may disrupt TWC s business. If TWC is unable to retain senior executives and attract and retain other qualified employees, its growth might be hindered, which could impede TWC s ability to run its business and potentially reduce its revenues and profitability. TWC s business may be adversely affected if it cannot continue to license or enforce the intellectual property rights on which its business depends. The accounting treatment of goodwill and other identified intangibles could result in future asset impairments, which would be recorded as operating losses. The IRS and state and local tax authorities may challenge the tax characterizations of the Adelphia Acquisition, the Redemptions and the Exchange, or TWC s related valuations, and any successful challenge by the IRS or state or local tax authorities could materially adversely affect TWC s tax profile, significantly increase TWC s future cash tax payments and significantly reduce its future earnings and cash flow. A significant portion of TWC s indebtedness will mature over the next three to five years. If TWC is unable to refinance this indebtedness on favorable terms its financial condition and results of operations may suffer. As a result of the indebtedness incurred in connection with the Transactions, TWC will be required to use an increased amount of the cash provided by its operating activities to service its debt obligations, which could limit its flexibility to grow its business and take advantage of new business opportunities. Risks Related to Dependence on Third Parties Increases in programming costs could adversely affect TWC s operations, business or financial results. TWC may not be able to obtain necessary hardware, software and operational support. TWC may encounter substantially increased pole attachment costs. The adoption of, or the failure to adopt, certain consumer electronics devices or computers may negatively impact TWC s offerings of new and enhanced services. Risks Related to Government Regulation TWC s business is subject to extensive governmental regulation, which could adversely affect TWC s business. Net neutrality legislation or regulation could limit TWC s ability to operate its high-speed data business profitably, to manage its broadband facilities efficiently and to make upgrades to those facilities sufficient to respond to growing bandwidth usage by its high-speed data customers. Rate regulation could materially adversely impact TWC s operations, business, financial results or financial condition. Changes in carriage regulations could impose significant additional costs on TWC. TWC may have to pay fees in connection with its cable modem service. The FCC s set-top box rules could impose significant additional costs on TWC. Applicable law is subject to change. Risks Related to TWC s Relationship with Time Warner Some of TWC s officers and directors may have interests that diverge from TWC s in favor of Time Warner because of past and ongoing relationships with Time Warner and its affiliates. Time Warner and its affiliates may compete with TWC in one or more lines of business and may provide some services under the Time Warner brand or similar brand names. TWC is party to agreements with Time Warner governing the use of TWC s brand names, including the Time Warner Cable brand name that may be terminated by Time Warner if TWC fails to perform its obligations under those agreements or if TWC undergoes a change of control. Time Warner controls approximately 90.6% of the voting power of the outstanding TWC common stock and has the ability to elect a majority of TWC s directors, and its interest may conflict with the interests of TWC s other stockholders. Time Warner s approval right over TWC s ability to incur indebtedness may harm TWC s liquidity and operations and restrict its growth. Time Warner s capital markets and debt activity could adversely affect capital resources available to TWC.

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1377013--2/23/2007--TIME_WARNER_CABLE_INC.