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Is Insight on the Block?

Insight Communications Co. Inc. has hired two firms to advise it on options including a sale or an expansion through acquisitions of its own.

An Insight spokeswoman confirmed the MSO has hired Morgan Stanley and Waller Capital Corp. to pore over a wide range of possibilities.

"We've received a lot of inquiries," about Insight's future as a smaller MSO, the spokeswoman says. Discussions with the advisors, she adds, will cover how Insight might continue on as a smaller operator, pursue a sale, or explore its own acquisition opportunities.

"They've been hired to advise us on all of our options," the she says.

Insight went private in 2005, merging with Insight Acquisition Corp., an entity led by Insight co-founders Sidney Knafel and Michael Willner (still Insight's CEO), and The Carlyle Group LLC . (See Insight Goes Private, Reports Q2.) A report from The Deal suggests The Carlyle Group is pursuing the sale option.

Any decision will be made in the wake of a deal between Insight and Comcast Corp. (Nasdaq: CMCSA, CMCSK) to unwind a cable system partnership in the Midwestern U.S.

That deal, expected to close by the end of the year, will give Comcast direct control of systems that pass 1.2 million homes and serve 684,000 basic subs. The agreement will shore up Comcast's clustering strategy in the Midwest, with systems serving parts of Illinois (Rockford/Dixon, Quincy, Macomb, Springfield, Peoria, and Champaign/Urbana), and cable properties in Bloomington, Anderson, and Lafayette/Kokoma, Ind. (See Comcast, Insight Divvy Up Midwest.)

Once that deal is done, Insight will operate a considerably smaller footprint with 640,000 subscribers in Bowling Green, Lexington, Louisville, and Florence, Ky.; Evansville, Ind.; and Columbus, Ohio.

How Insight and The Carlyle Group would move on from that point, either alone or through a sale, has been the subject of much speculation in recent weeks.

Sanford C. Bernstein & Co. Inc. analyst Craig Moffett has wondered whether the Comcast-Insight deal could spur Time Warner Cable Inc. (NYSE: TWC) to absorb the rest of Insight, because its remaining systems would be a "near perfect fit" with some TWC properties.

Moffett told The Deal that it would be "a stretch to see Time Warner Cable pay much north of $4,000 per subscriber," should such an agreement come to fruition. He also suggested that the prospect of rising programming costs is "like a ticking time bomb" at Insight that can only be "defused" by larger MSOs like Comcast and TWC.

When the Comcast-Insight deal was announced, Time Warner Cable declined to speculate on a possible Insight deal, noting only that it "remains opportunistic regarding growth opportunities."

Earlier this month, Insight posted first-quarter revenues of $339.5 million, up 13 percent, buoyed by RGU (revenue generating unit) growth and video rate increases.

— Jeff Baumgartner, Site Editor, Cable Digital News

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