Cable company commerce could cause customer change-up

Nathan Baker • May 9, 2014 at 8:38 PM

A shake-up in the domestic cable television industry could mean changes for local subscribers when the country’s two largest providers merge later this year.

In February, Comcast Corp., the largest subscription cable television operator, announced a $45.2 billion acquisition of Time Warner Cable, its nearest competitor.

To make the merger more palatable for antitrust regulators, in front of whom company executives defended the plan Thursday, Comcast included in its announcement separate plans to exchange and sell millions of current subscribers to fourth-ranked Charter Communications.

According to plans filed last week with the Securities and Exchange Commission, in order to keep ownership below 30 percent of the market — normally considered a benchmark for antitrust approval -— Comcast will sell 1.4 million former Time Warner customers to Charter for a princely $7.3 billion.

The companies will also trade approximately 1.6 million customers in strategic locations to create more efficient footprints for Comcast and Charter.

In the third phase of the deal, Comcast will spin off 2.5 million of its existing customers to a new company, creatively named SpinCo in the SEC documents, of which Charter will acquire a third of the shares by issuing $2.1 billion in equity to SpinCo’s shareholders.

Comcast’s customers in Johnson City, Jonesborough and Bristol fall into the SpinCo zone, according to the company’s Central Division Public Relations Vice President Brian Farley.

In an email Friday, Farley said Charter will own a minority stake in SpinCo; have executives on its board of directors, including Charter CEO Tom Rutledge; and will provide operational support to the new company under a services agreement.

Comcast shareholders, including those migrating from the former Time Warner Cable, will hold majority ownership.

Generally speaking, Farley said SpinCo will provide video, broadband Internet and voice telephone services to its customers, but said it’s too soon to name the provider from which those services will originate.

“Those decisions will ultimately rest with the new company,” he wrote.

Farley said local customers will be transferred to SpinCo after the close of the Comcast-Time Warner merger, which the companies hope will happen by the end of the year.

After the customer sale and transfer, Charter will be the second-largest cable provider in the nation, behind Comcast and ahead of Cox Communications.

Follow Nathan Baker on Twitter @JCPressBaker. Like him on Facebook at www.facebook.com/jcpressbaker.

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