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Is Cable One Beefing Up for Slaughter?

Is Cable One positioning itself to be acquired by gobbling up smaller cable operators?

That's the big question that some on Wall Street are asking after Cable One Inc. swung a deal earlier this week to buy NewWave Communications. As previously reported, Cable One plans to shell out $735 million in cash for the privately held MSO, which operates mainly in rural areas and small towns spread across seven states in the US heartland -- Arkansas, Illinois, Indiana, Louisiana, Mississippi, Missouri and Texas. The deal will make the new Cable One probably the sixth-largest cable operator in the land with somewhere north of 800,000 customers. (See Cable One Bids $735M for NewWave.)

In a blog post to clients, Craig Moffett, principal analyst of MoffettNathanson LLC , noted that many investors expected Cable One to be selling itself off by this point, not buying another cable operator. But he argued that investors shouldn't be all that surprised because the company's executives have expressed interest in expanding their 19-state footprint before.

Besides, Moffett continues, the New Wave acquisition "arguably only makes it more likely," not less, that Cable One will get bought out by some larger, hungry MSO like Altice somewhere down the line. "Getting bigger, given their small starting scale, certainly doesn't preclude eventually being acquired themselves," he wrote.

In the meantime, Cable One will undoubtedly work to bring NewWave's cable systems up to snuff and make them more attractive to future suitors, applying what Moffett calls its "unconventional broadband-first, video-lite strategy" to the NewWave properties. Under that strategy, Cable One has been heavily promoting its broadband service and rolling out 1-Gig speeds while cutting back on its much less profitable traditional pay-TV service and relying more on online video offerings.


Want to know more about video and TV market trends? Check out our dedicated video services content channel here on Light Reading.


Taking that approach, Cable One has boosted its once dismal broadband penetration rate to a more respectable 31% while letting its video penetration rate sink to just 20%. As a result, the Phoenix-based MSO, which passes nearly 1.7 million homes, closed the third quarter with 467,000 broadband subscribers but merely 316,000 video subs.

Interestingly, NewWave's customer take figures are not that radically different. The MSO, which passes nearly 420,000 homes in its non-urban footprint, has a broadband penetration rate of 26% and a video penetration rate of 24%. So, as Moffett argues, "there may not be too much heavy lifting required to align the two."

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

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Michelle 1/21/2017 | 1:41:11 PM
Re: Moooooo Agreed. Totally missed a good clickbait opportunity here!
Sterling Perrin 1/20/2017 | 3:19:34 PM
Re: Moooooo Dennis,

You are showing your age. A proper social media-age headline should read:

"10 Reasons Cable One is Bound for the Slaughter House... and Number 5 Will Give You Chills!"
mendyk 1/20/2017 | 2:40:29 PM
Re: Moooooo You're right -- it's been a while since I wrote headlines for a living. And to be fair (?), it could be that our intrepid headline writer was anticipating today's pre-apocalyptic address. Slaughter. Carnage. Good times on Planet Abattoir.
brooks7 1/20/2017 | 2:28:14 PM
Re: Moooooo Come on Dennis you have to do fake new better than that...

You won't believe Kim K's reaction to Charter One!

seven

 
mendyk 1/20/2017 | 1:59:05 PM
Re: Moooooo Here's the Cable One Tweet Kimye Didn't Post
mendyk 1/20/2017 | 1:54:31 PM
Re: Moooooo Here's the thing -- the "metaphor" makes no sense. I understand that headlines are judged by the number of clicks they bring in. Are Kardashian references next? Sorry to get all high-horsey here, but there is a fine line between stupid and clever.
alanbreznick 1/20/2017 | 1:47:52 PM
Re: Moooooo Good ones, Kevin. Thanks.
Kevin Mitchell 1/20/2017 | 1:41:21 PM
Re: Moooooo A cow wouldn't beef itself up knowingly for slaughter. But the rancher would. So headline could be Tom Might Beefing Up Cable One for Slaughter? or Might There Be a Cable One Slaughter In the Making?

 

:-)
alanbreznick 1/20/2017 | 12:14:13 PM
Re: Moooooo Thanx, guys. Glad we have two saisfied readers, at least. :)
ErynLeavens 1/20/2017 | 12:10:26 PM
Re: Moooooo An acquisition definitely can be a job death sentence. And even as a vegetarian, I'd have to say I quite like this headline.
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