DukeNet Acquisition Will Bolster Time Warner Cable’s Business Services In The Southeast

by Trefis Team
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TWC
Time Warner Cable
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Time Warner Cable (NYSE:TWC) has agreed to buy fiber-optic network provider DukeNet Communications for $600 million in cash.  The company is acquiring 50% of the business from Duke Energy Corp (NYSE:DUK) and the other half from investment funds managed by Alinda Capital Partners. The deal also includes the repayment of debt and is expected to close in the first quarter of 2014. [1] While the company has been losing its basic video subscribers, broadband and business services are driving growth for the company. TWC has witnessed robust growth in its business services in the recent past and this acquisition will further bolster its presence in the Southeast region.


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The Deal Inclined Towards Business Services

DukeNet Communications is a North Carolina based fiber optic network company, which operates a fiber-optic network for wireless carriers, data centers, government customers and corporate clients. TWC plans to use DukeNet to expand its business services in seven Southeastern states, including North and South Carolina. The company’s business services include video, high-speed data, voice services, networking and transport services (including cell tower backhaul services) and enterprise-class, cloud-enabled hosting, and managed applications and services. [2] Earlier in 2011, the company acquired NaviSite Inc. for $230 million and the deal helped the company gain more business customers. In the latest quarterly filings, the company saw a 10% increase in its business customers and 21% jump in business services revenues, as compared to the same period previous year. [2] This was 13th consecutive quarter for the company with growth in this segment.

TWC is not alone seeing such demand in this segment. The cable mammoth Comcast (NASDAQ:CMCSA) has also witnessed healthy growth in the recent past. TWC already owns 350,000 fiber miles across the U.S. and this acquisition will add another 8,700 miles of fiber-optic network. The company stated that the acquisition will enhance its growing fiber network, especially in the Carolinas. [1] North Carolina is an important destination for businesses and recently Forbes rated it as the 4th best state for business in the U.S. After losing thousands of basic video subscribers, TWC has now been marketing itself as a pure broadband player, and we believe that broadband along with business services will drive the future growth for the company (Read – Broadband Will Continue To Drive Growth For Time Warner Cable)

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Notes:
  1. Time Warner Cable to acquire Regional Fiber Optic Network Company DukeNet Communications, Time Warner Cable Press Release, Oct 7, 2013 [] []
  2. Time Warner Cable’s SEC Filings [] []
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