Cable Business Services

TWC Scoops Up DukeNet

Time Warner Cable is adding a lot more fiber to its diet.

Time Warner Cable Inc. (NYSE: TWC), the second-largest US MSO, announced its intention Monday to buy DukeNet Communications from Duke Energy Corp. and Alinda Capital Partners for $600 million. The acquisition will give TWC a regional fiber optic network in the Southeast that's more than 8,700 miles long.

While largely concentrated in North and South Carolina, the fiber network also extends into regions of Virginia, Georgia, Tennessee, Florida, and Alabama. About 80 percent of the fiber network reportedly falls within Time Warner Cable's footprint, which covers much of the Carolinas.

Time Warner Cable is emphasizing the importance of the DukeNet acquisition to its commercial services business, which produced record revenues of $565 million in the second quarter, up nearly 22 percent from the same period in 2012. Over the first half of the year, business services generated about $1.1 billion in revenue for TWC, up more than 23 percent from last year, putting it on track to crack the $2 billion mark for the first time. (See Broadband Saves TWC's Sales.)

In a prepared statement, TWC Executive Vice President Phil Meeks noted that business Services is "a key growth area for Time Warner Cable." Meeks, who took over TWC's business services division in June after heading up Cox Communications Inc. 's business services unit for five years, said "this acquisition will greatly enhance our already growing fiber network to better serve customers, particularly those in key markets in the Carolinas."

Since assuming command of the TWC business services unit just four months ago, Meeks has already restructured the division to spur even faster growth. In particular, he's looking to move the MSO upmarket by targeting larger companies, carriers, and the wholesale telecom business while continuing to serve small-to-midsize businesses (SMBs), similar to his expansion strategy at Cox. In addition, Meeks has set an ambitious growth target for the TWC unit, aiming to reach $5 billion in annual revenues within five years.

There is one other interesting wrinkle to the DukeNet acquisition story. Time Warner Cable formally submitted a bid to participate in the North Carolina Next Generation Network (NCNGN) project last April. Dedicated to educational and economic development in the state, NCNGN is working to accelerate high-speed network deployments and is actively seeking vendor partners for the project. Although TWC did not respond to Light Reading's request for details on the matter, the DukeNet purchase could be, at least in part, a play to strengthen the company's NCNGN bid.

— Mari Silbey, Special to Light Reading Cable

Interested in learning more on this topic? Then come to a Light Reading Live event that takes place Wednesday, December 4, 2013 at the Westin Times Square in New York City. Back by popular demand for the seventh straight year, The Future of Cable Business Services 2013 is a one-day conference that will examine the progress that cable operators are making in the roughly $140-billion US business telecom services market and the challenges they face in keeping up the momentum. For more information, or to register, click here.

albreznick 10/14/2013 | 8:41:18 PM
Re: Wholesale network OK. That'll be something to watch. I don't get the sense that Comcast is looking to buy something for their business services arm right now. But who knows what Bill Stemper might have up his sleeves these days?  
JonathanT231 10/11/2013 | 10:16:29 PM
Re: Wholesale network They'd be a big purchase, yes. $200m market cap, 1600 employees. But someone might want their footprint. They're cheaper than they used to be, but logical buyer (in Philly) might be happy enough growing organically and competing against them.
albreznick 10/10/2013 | 5:46:40 PM
Re: Wholesale network Good point, JT. CBeyond is pretty big, tho, isn't it? Who do you think would and could scoop them up?
JonathanT231 10/9/2013 | 1:10:10 PM
Re: Wholesale network What about Cbeyond (CBEY)?
albreznick 10/8/2013 | 9:36:30 PM
Re: Wholesale network So who else might be out there for the big cable cos to buy? Any good candidates, anybody?
DOShea 10/8/2013 | 8:44:23 PM
Wholesale network Carol, you might be on to something. Somewhere else on our vast message boards, another commenter suggested the possibility of a major cable TV company--I think it was TWC--buying a large wholesale operator like Level 3. As the cable guys become more of a force in business markets, it just might make sense.
Carol Wilson 10/8/2013 | 4:33:21 PM
Re: Phil Meeks' Influence I'm pretty sure DukeNet has been a very separate entity for a while now -- but you are right, most of the utility companies learned the hard way that running telecom is more than having a fiber network.

Phil_Britt 10/8/2013 | 4:15:31 PM
Re: Phil Meeks' Influence Duke getting out of telecom business makes sense. Too often companies enter other businesses to diversify, but find they just can't compete with the firms such as Time Warner that specialize in a particular industry.

Don't know how many other utilities still have what could be attractive telecom assets. It will be interesting to see if many similar transactions follow between other utilities and Time Warner or other cable firms.
Carol Wilson 10/8/2013 | 12:20:28 PM
Re: Phil Meeks' Influence From the other angle, DukeNet was one of the original forays by a utility company into offering telecom services, and did some pretty innovative stuff over the years. Interesting to see it sold, although I think it's been expected for some time now. 

I would think this would position TWC to do well with bigger businesses, particularly those with strong regional presence in the Southeast. It would not be at all hard to extend the reach of its services up the Atlantic coast, as you are speculating, by connecting to any one of a number of wholesale fiber networks. 

Unless, of course, TWC wants to buy one of them, too.
albreznick 10/8/2013 | 12:08:31 PM
Phil Meeks' Influence Phil Meeks is really putting his stamp on TWC's business services unit, between his recent reorganization and this deal. It will be intersting to see how much new business this SE fiber network can generate for Time Warner. It will also be interesting to see if TWC tries to extend the network up into the mid-Atlantic states and Northeast. 
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