Time Warner Cable Inc.
) announced its plan to acquire a regional fiber-optic network
company, DukeNet Communications LLC, for $600 million in cash.
The financial terms of the deal include the repayment of all
outstanding debts of DukeNet. North Carolina-based DukeNet is
Duke Energy Corp.
) and Alinda Capital Partners, each having a 50% stake. The deal
is expected to close by the first quarter of 2014, subject to
customary regulatory approval.
DukeNet has an extensive fiber-optic network of more than
8,700 miles across North and South Carolina and five other states
in southeastern U.S. DukeNet offers data and high-capacity
bandwidth services to wireless service providers, data centers,
government and enterprise customers. The proposed acquisition of
DukeNet will strengthen the Business Service division of Time
Despite being the second largest cable MSO (multi service
operator) in the U.S. after
), the company is suffering from heavy residential video
subscriber loss. Cable MSOs are facing massive competitive threat
from fiber-based TV network of telecom operators and online video
streaming service providers.
In order to counter this threat, cable TV operators are
increasingly targeting enterprise customers. Business Service has
become the key growth area of Time Warner Cable. In the third
quarter of 2013, the company generated $565 million of revenues
from this segment, up 21.8% year over year.
Moreover, Time Warner Cable is incurring mounting programming
expenses. Last month, the company had to settle a deal with media
) with significantly higher programming costs. In contrast,
Business Service division is a high margin one. The proposed
acquisition of DukeNet will enable the company to deliver more
network services to wireless towers.
In 2011, Time Warner Cable had purchased NaviSite Inc., a
cloud-based information service provider, for $230 million to
strengthen its Business Service division. Time Warner Cable
currently has a Zacks Rank #3 (Hold).
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