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Vultures Circle TW Cable

Mari Silbey
11/25/2013
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Cable consolidation hype is definitely rising as the end of the year approaches. Led by the Wall Street Journal, several media outlets are now reporting that the vultures are circling Time Warner Cable Inc. (NYSE: TWC) as they smell blood.

CNBC first reported Friday that Comcast Corp. (Nasdaq: CMCSA, CMCSK) has joined Charter Communications Inc. in the hunt to take over Time Warner Cable, the second-biggest US MSO after Comcast. Bloomberg then added to the story with news that Comcast and Charter are considering a joint bid to acquire TW Cable, with each company likely to take on the customers that best align with its existing footprint.

According to both CNBC and Bloomberg, TWC appears to be more interested in a deal with Comcast than an acquisition by Charter as proposed by Liberty Global Inc. (Nasdaq: LBTY) Chairman John Malone. Bloomberg cited a "person with direct knowledge of the matter" as saying that incoming Time Warner Cable CEO Rob Marcus would prefer to work alongside Comcast CEO Brian Roberts than alongside Malone.

TWC had a dismal earnings report in the latest quarter, losing well over 100,000 customers in total, including 306,000 basic video subscribers, and thereby fueling the new wave of takeover speculation. The Wall Street Journal reported in October that an investor uprising is likely at the company if no merger or acquisition deal is done shortly after Marcus takes over the CEO reins at the start of 2014. (See TW Cable Hemorrhages Subs and Merger Pressure Mounts for Time Warner.)

The cable industry as a whole is under consolidation pressure as competition mounts for new video and broadband subscribers. Programming costs are a major concern as video providers increasingly see their profit margins squeezed by higher content licensing fees.

In related news, both AT&T and Comcast are reportedly planning to hike fees in the near future with a broadcast TV surcharge. The additional surcharge won't show up in the initial price on customers' monthly bills, but will appear further down on the bills.

— Mari Silbey, special to Light Reading Cable

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albreznick
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albreznick,
User Rank: Blogger
11/28/2013 | 12:48:25 PM
Re: Cablevision
Good point on Cablevision, Mordy. RCN is also in Boston, DC, Chicago and SF, I believe. the other rthing that makes NYC unique from a cable perspective is that it's split between two MSOs--TW Cable and Cablevision. Not many other cities like that anymore. but, of course, New York IS New York.  
DOShea
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DOShea,
User Rank: Blogger
11/26/2013 | 5:15:24 PM
Re: Broadcast Surcharge?
Carol, I don't know if you have Comcast here in the Chicago area, but my bill that just came yesterday has the $1.50 broadcast fee that Mari mentioned (and as reported earlier by our message board friend Karl Bode).
MordyK
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MordyK,
User Rank: Light Sabre
11/26/2013 | 4:29:47 PM
Re: Cablevision
While technically public, through the share structure the Nolan family as super-voting control over the company akin to the NY Times.

An interesting aside: NY is one of the only markets where parts of the city have a choice of 2 cable franchisees as we also have RCN in select neighborhoods.
albreznick
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albreznick,
User Rank: Blogger
11/26/2013 | 4:22:19 PM
Re: Cablevision
Cablevision is actually a public company, like TW Cable and Charter. But they're not in a good position to buy anybody either. In fact, like TWC, they're often seen as a takeover target now. Their problem is that they compete head-on with Verizon FiOS in NY, hurting their bottom line as well. And they don't offer any other markets. So TWC is clearly the more appealing target right now.
albreznick
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albreznick,
User Rank: Blogger
11/26/2013 | 4:17:59 PM
Re: Broadcast Surcharge?
Pretty sneaky, eh? Does the FCC have any power to regulate these types of charges, Mari?
MordyK
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MordyK,
User Rank: Light Sabre
11/25/2013 | 4:01:24 PM
Cablevision
Mari, I'm amazed that Cablevision is nowhere in the mix. While I know they are a private company teh fact is that TWC is interwoven into their markets and the content issues are applicable to them just as well.
Carol Wilson
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Carol Wilson,
User Rank: Blogger
11/25/2013 | 2:47:57 PM
Re: Broadcast Surcharge?
Wow, I wasn't paying attention - how widespread is this kind of surcharge?
msilbey
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msilbey,
User Rank: Blogger
11/25/2013 | 2:46:58 PM
Re: Broadcast Surcharge?
That's exactly what it's like. And it's already a trend. I don't think there's any turning back. 
Carol Wilson
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Carol Wilson,
User Rank: Blogger
11/25/2013 | 2:38:56 PM
Broadcast Surcharge?
Is this like paying extra to check a bag on the airline? It's not part of their advertised price, but you get to pay it anyway. You also pay more to get a seat with leg room, a snack on the plane and, in some cases, space for a carry-on. 

I get that content costs are putting the squeeze on video providers and they want consumers to know where those costs are rising. But I hope this doesn't become a trend for broadband service providers. Consumers have a much harder time comparing prices and finding their best deal when some charges are hidden as "surcharges."

 
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