Time Warner Cable Acquires NewWave’s Cable Systems
Source: Wikimedia
Time Warner Cable (NYSE:TWC) recently announced that it has agreed to acquire cable systems from NewWave Communications in Kentucky and western Tennessee for a reported $260 million. [1] This will allow Time Warner to gain access to about 70,000 basic pay-TV subscribers along with about 42,000 Internet and 26,000 phone subscribers. Cable companies like Time Warner Cable and Comcast (NASDAQ:CMCSA) are finding it difficult to retain video subscribers that satellite companies like DirecTV (NASDAQ:DTV) and telelcoms like AT&T (NYSE:T) and Verizon (NYSE:VZ) have gained subscribers in recently. Another rationale behind acquisition is possible operational cost savings due to Time Warner Cable’s adjacent cable systems. [2]
If we assume that Internet subscribers are a subset of pay-TV subscribers here, Time Warner Cable’s acquisition cost stands at little over $3,700 per subscriber. If the company can move these subscribers to digital platform, it would recoup the cost of acquisition more quickly.
Our price estimate for Time Warner Cable stands at $70.50.
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Notes:- Time Warner Cable Buys Cable Systems, The Wall Street Journal, Jun 13 2011 [↩]
- UPDATE 1-Time Warner Cable snaps up NewWave systems, Reuters, Jun 13 2011 [↩]