Where will Comcast find 3M TWC Subs to Divest?

The word on the street is that the Comcast  acquisition of TWC marches forward and will be completed by the end of 2014.  TWC  sent a letter (email) to subscribers last week, signed by  CEO Robert D. Marcus, promising that the “merger” will benefit existing customers:

“The combined company will innovate faster and deploy even better products and features, including a superior video guide, faster Broadband Internet speeds and even more WiFi access points so you can access the Internet wherever you go. “

It would have  been more comforting if Mr. Marcus had put in a word about rates staying the same – he did not.

Part of this “merger”  requires that Comcast divest itself of 3 million subscribers in order to stay under 30% of the whole market. Some of  today’s customers will have to be sold off to another provider and this may be one of the most challenging parts of the deal. How will Comcast select 3 million subs and who will take them?

TWC vs Comcast by Mosaik Solutions and  NYT The Comcast-Time Warner Deal, by the Numbers

TWC vs Comcast by Mosaik Solutions and NYT The Comcast-Time Warner Deal, by the Numbers 2-13-14.

TWC has major operations in Texas,  Southern California,  the Midwest,  and the Carolinas. Comcast surely will try to keep these systems whole, especially since they can be combined to adjacent Comcast entities.  For example Comcast has most of northern California, and operates in Houston.

The  easiest candidates for divestiture might be the existing TWC systems that aren’t part of the major metro clusters that Comcast will desire. Here some candidates with numbers where I could find them. If I don’t have TWC numbers I give “households”.  Assume TWC cable subscribers will be some small fraction of this household number.

TWC Kansas City:  970,069 households.  KC is isolated but oh it’s right there in Google Fiber land.  TWC might hesitate to walk away from the heat of the battle.

TWC Hawaii (Oceanic):      350,000 subs.  There is no dispute that Oceanic is isolated by all that Pacific ocean between LA and Honolulu.  TWC Oceanic has a reputation for being the rogue of the family and might not mind reverting to just Oceanic Cable.

TWC Kentucky, Indiana, Ohio: 750,000 subs. This  would mean undoing the 2011 Insight acquisition.

TWC Lincoln Nebraska:  103,546 households. This might be one of the easier choices.

TWC Maine: 196,669 households in Portland Maine MSA.

TWC  Dothan and Enterprise, AL: about 32,000 households combined.

TWC  Coeur d’Alene, ID: 18,395 households.

To get to 3 million Comcast might have to “cut the cord” so to speak on some existing Comcast subscribers.  Comcast has some service areas in the middle of the country that might be sacrificed. Places like Salt Lake City, Albuquerque and Little Rock. Even so I’m not sure these can add up to 3 million. And if they don’t Comcast will have to make some more drastic sacrifice of a major metro area.

Who will take them?

Some have speculated that  a new company could be spun off. If so this  new operator  of 3 million would be the 9th largest just behind Cablevision. But that seems complicated and unnecessary. There are cable operators  that don’t mind having disparate systems around the country. Once Comcast assembles the list they will probably go up for sale to the highest bidder.

Conclusion

This is no easy exercise. I do think Comcast will look to keep the major metro clusters together, especially  Texas and the coasts. It will be fun to watch – stay tuned.

Update 4-19-14:  Comcast in talks with Charter over divestitures: source


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3 Responses to Where will Comcast find 3M TWC Subs to Divest?

  1. Len Mullen says:

    I’d dump markets where Google Fiber is installed or planned. No need to compete on price or performance.

    • Greg says:

      That may be one thing Comcast will talk about, but I doubt they’ll go that way. If Comcast pulls out of KC and Austin it just gives Google Fiber momentum. And with the recent news about GF expansion cities I don’t think they can afford that.

  2. Len Mullen says:

    They have to shed customers and you cannot do that by leaving areas you do not have a lot of customers in. The customers you want to leave are those that will cost you the most to retain. The customers that will cost the most to retain are in areas that 1) require significant improvement, or 2) are competitive. Obviously, competitive areas with aging infrastructure would be the most likely to go.

    I’m not suggesting they cede all areas where Google builds — just that those areas are likely to shed customers anyway and be less profitable going forward.

    Comcast could actually return to those markets with an OTT only offering — leaving Google to manage support and infrastructure.

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