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TWC: We'll Give Comcast a Business Boost

Alan Breznick
3/14/2014
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If there's one area where Time Warner Cable could teach Comcast a thing or two, it's probably on the business services front. At least Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable Inc. (NYSE: TWC) seem to think so. Speaking at two recent investment conferences on opposite ends of the US, top executives of both major MSOs contended that Comcast's pending buyout of TWC should help the combined company capture more commercial revenue than the two MSOs could capture on their own.

In the more recent case, TW Cable chairman and CEO Rob Marcus claimed that his company could help Comcast extend its reach beyond smaller companies, which now account for the vast bulk of Comcast's commercial revenues. Speaking at the Deutsche Bank Media, Internet, and Telecom conference in Palm Beach, Fla., earlier this week, Marcus said the addition of TWC would enable Comcast to pursue more midsized and larger companies and generate even more revenue. (See Comcast Makes Middle Market Gains.)

"It's a maturation process," he said, noting that Comcast entered the commercial market later than TWC. "Comcast is now more focused on SMBs."

The comments by Marcus align with what top Comcast officials have been saying. For instance, Comcast vice chairman and CFO Michael Angelakis said the proposed TWC acquisition would enable his company to beef up its commercial presence by adding such premier business markets as New York, Los Angeles, and Dallas. Speaking at the Morgan Stanley 2014 Technology, Media, and Telecom conference in San Francisco last week, Angelakis said TWC could particularly help Comcast break into the hard-to-crack enterprise market.

In his Palm Beach appearance, Marcus also contended that TW Cable could help Comcast boost the share of overall revenue that its business services division contributes. Although Comcast now rakes in far more revenue from business services than any other major North American MSO, that's due largely to its much bigger footprint, which is at least twice as large as any other cable operator's reach.

Indeed, even though they trail well behind Comcast in the commercial revenue rankings, both TWC and Cox Communications Inc. actually take in more business services receipts, in proportion to their sizes. As a result, the commercial sector contributes a greater share of their overall revenues than it does for Comcast.

For example, as Marcus spelled out, TW Cable's commercial haul of $2.3 billion last year accounted for about 12% of the MSO's total revenue. In contrast, Comcast's much larger commercial haul of $3.2 billion accounted for about 9% of its overall revenues in 2013. "I would expect the [business services units'] percentages of total revenues to grow for both companies," he said. (See Meeks Sees Business Boom at TWC.)

Moreover, Marcus said, the union of Comcast and TWC should enable the combined company to compete better for national and even international business prospects. With the major TWC markets added to its portfolio, Comcast would have its cable networks in an impressive 19 of the top 20 US markets, leaving Phoenix the only top 20 market not represented.

With this kind of enhanced market presence, he said, the new Comcast could take on Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T), and other big telecom players in the large enterprise space. There are "potentially huge opportunities" on the business services side, he noted, rhapsodizing about the possibilities of offering "one-stop shopping" for big national and international customers.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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DHagar
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DHagar,
User Rank: Light Sabre
3/17/2014 | 1:24:20 PM
TWC: We'll Give Comcast a Business Boost
Mitch, that can make this a very smart move!
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/17/2014 | 1:14:41 PM
Re: TWC: We'll Give Comcast a Busikness Boost
Clearly, this acquisition is about more than just making a big company even bigger. It fills a big lacuna in Comcast's offerings. 
DHagar
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DHagar,
User Rank: Light Sabre
3/17/2014 | 12:42:11 PM
TWC: We'll Give Comcast a Business Boost
@Phil, Exactly.  Comcast may feel they have "the answers".  If they incorporate TWC's answers as well they can have the best of both worlds.
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
3/17/2014 | 11:09:55 AM
Re: TWC: We'll Give Comcast a Busikness Boost
Indeed, the management of the transition will be critical. In some mergers, the acquiring company will want its processes adopted across the expanded enterprise, even if in some instances the acquiree had a better mousetrap.

So it remains to be seen if Comcast will adopt some of TWC's business strategies.
mendyk
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mendyk,
User Rank: Light Sabre
3/15/2014 | 6:41:14 PM
The one with the red logo
The Economist -- yes, The Economist -- has come out against the Comcast/TWC merger, saying it would hamstring innovation and lead to higher prices for continued weak service. I can't say I agree with the logic, but the fact that this usually friendly business organ is playing this tune is noteworthy.
DOShea
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DOShea,
User Rank: Blogger
3/14/2014 | 10:42:44 PM
Carrier Ethernet
Both companies have been pretty aggressive with Carrier Ethernet, though TWC even more so, with the complete set of eight CE 2.0 certifications. I believe Comcast also has CE 2.0 certification to some extent. It would be nice to see the combined company leverage that fact for competitive differentiation.
DHagar
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DHagar,
User Rank: Light Sabre
3/14/2014 | 6:47:21 PM
TWC: We'll Give Comcast a Busikness Boost
Alan, great analysis.  It sounds as if TWC has the better overall business agility and capability.  The question may be whether Comcas will learn from TWC or try to fit TWC into its model; a key question always with M&A.  I guess the key will be how well they manage this transition.

 
Liz Greenberg
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Liz Greenberg,
User Rank: Light Sabre
3/14/2014 | 6:41:50 PM
SMBs...that could be a great plus
Alan, it is nice to see that these companies are actually focusing on a hugs business sector - small and medium size businesses.  That shear number of them is much greater than the number of large businesses and their needs are very different.  I hope that they do a great job here with innovative and cost effective solutions in this sector.
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