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It's About Time (Warner)

Michael Harris
BroadBananas
Michael Harris
5/27/2008

It's no secret that Time Warner Cable Inc. (NYSE: TWC) (TWC) will soon be striking out on its own. (See Time Warner Cable Leaving the Nest.).

What's perhaps most notable about the deal is pointed out nicely by Sanford C. Bernstein & Co. Inc. analyst Craig Moffett in a research note: "The transaction will leave TWC with a single class of shares, and trading as the first fully investor-owned cable company in the United States... ever."

This is a sharp contrast to the classic friends-and-family-dominated cable operator category. At Comcast Corp. (Nasdaq: CMCSA, CMCSK) it's the Roberts family, and at Cablevision Systems Corp. (NYSE: CVC) it's the Dolans. At Adelphia Communications, it was the notorious Rigas clan. In each case, the company's controlling family governs the enterprise with a special class of voting shares, leaving investors as participants via equity, but not governance.

"TWC may well be the best way to participate in the cable industry's free cash flow growth with minimal risk of management misadventure subverting cable cash flows into other ventures," Moffett wrote, taking a swipe at the Dolans' recent plan to purchase Newsday. (See Big News Day .).

Moffett continues: "Shareholder activism, and even the prospect of a hostile take-over, would be possible at TWC in a way that would be utterly unique among the cable group. We believe this independence warrants a premium to cable peers."

The analyst further speculates that this ownership structure may position TWC as America's first blue-chip cable operator, making the company "a likely candidate for S&P Index inclusion immediately upon gaining its Independence."

It's about time.

— Michael Harris, Chief Analyst, Cable Digital News

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