Phil Meeks, TWC Business Services: A new chapter
The merger between Time Warner Cable and Comcast has some major implications for wholesale as well as cable. Capacity speaks to the COO and EVP of TWC Business Services, Phil Meeks.
On his first day as Time Warner Cable (TWC) Business Services EVP and COO, Phil Meeks did not make the conventional inaugural visit to his new office in New York to meet and greet his new colleagues. Instead, Meeks found himself on board a plane to Washington DC to attend the National Cable & Telecommunications Association (NCTA) Cable Show, where the biggest hitters in the industry congregate to discuss all things cable. In Washington, talks soon turned to consolidation in the cable market.
“My first day on the job was June 3 2013, and this was the day that John Malone first began talking about market consolidation in cable and his view on what the industry needed to grow,” he says.
Meeks reveals to Capacity that Malone used the conference to urge the industry to open up for consolidation, and for those in the market to develop Multi Service Operators (MSO) that “are bigger, have more scale and are able to effectively compete to get advantages of that scale”.
As it transpires, Meeks’ first day marked a new era of consolidation in the cable market, the likes of which has never been seen before. Shortly afterwards, Charter Communications was reported to have made three bids to acquire TWC, all of which were rejected. It only took one Comcast offer – valuing the company at $158.55 per share – to turn TWC’s board.
“Our CEO, Rob Marcus, was consistent in his messaging. Any deal had to reflect the true value of the business, while providing value for shareholders,” says Meeks. “We were not for sale when I started, but anything is for sale at a certain price.”
Will consolidation benefit end users?
Fast-forward to May 2014, and the company is going through the process of a $45 billion takeover deal, with US cable leader Comcast and TWC doing everything they can to convince the FCC, industry peers and rival companies that it is a good deal for the segment.
“We fully expect the deal to go through,” says Meeks. “There are a number of different voices expressing concern and it is our job to indicate that this deal is pro-competitive.”
Comcast has filed a 175-page document to the FCC explaining why its acquisition of TWC should be approved. Comcast’s plan to combine the two largest US cable operators is being sold as necessary consolidation in a market where investment in video and broadband infrastructure is essential. Users continue to demand bandwidth-intensive services, and such consolidation, it claims, is aimed at benefiting the consumer.
In many ways, this stance plays directly into the hands of Meeks and his business services team. While the merger of TWC and Comcast will make the headlines for being a merger between two of the largest residential cable companies, it will also bring together two huge wholesale divisions.
TWC Business Services has had a mammoth growth trajectory over the past five years, with Meeks estimating a year-on-year revenue growth rate of 20%. TWC Business Services alone is now worth approximately $2.5 billion, growing from $900 million in 2009, and Meeks has a target to turn this into $5 billion by 2018.
Of course, if the Comcast deal does go through, the business services unit for the merged company will already be worth $5.5 billion, with both cable players growing at a similar rate. Meeks says that with the combined entity addressing 23 out of 25 markets in the US – almost nationwide reach – it has a distinct advantage over competitors.
“We know what we have to do,” says Meeks. “Firstly, we have to focus on the SMB marketplace. Our value proposition is already compelling and we have better infrastructure than our competitors.”
Meeks reveals that Small Business Enterprises, which serves businesses with 25 employees or less, makes up 85% of TWC Business Services’ customer base and 65% of revenues. Additional growth, he says, must come from the migration from DSL to broadband, which TWC can capitalise on to “move up the market” and serve businesses that are mid-size players with up to 500 employees. Meeks proclaims the opportunities that exist for TWC to leverage growth from the carrier space to be “a once-in-decade opportunity”.
Both AT&T and Verizon have announced intentions to decommission their legacy data transport networks, which will force their customers to migrate, as carriers continue their drive towards IP. Meeks says he “wants TWC to be part of that evolution”.
“For us, the opportunity lies in how we win those customers,” he tells Capacity. “AT&T and Verizon will still have all their legacy networks – including TDM and copper – which will put pressure on their cost models. They have to maintain all of that as well as migrating customers to IP and Ethernet, and it’s our job to capitalise on that.”
In keeping with this strategy, TWC closed a deal to acquire wholesale provider DukeNet for $600 million in January this year, giving it access to a 14,000km fibre-optic network. It also bolstered is cell tower network to 14,000 sites, while complementing its growing cell tower backhaul business.
Fluent in telecoms
With a background in the telco space, Meeks grew up in a world of MCI, AT&T and big Fortune 100 companies. In those days, he says, the most important factor for enterprise customers was having big, fast, reliable pipes that connected enterprises to different locations.
This model is now beginning to evolve, with cloud likely to lead the evolution of how enterprises connect to each other. TWC’s acquisition of cloud provider Navisite in 2011 was primarily designed to allow the company to leverage network and cloud services into one tailor-made solution, with Meeks claiming that TWC was one of the first big network operators to identify the opportunities that existed in cloud services.
“We are one of the big network providers that also run a cloud division,” says Meeks. “Initially, the company sat down and looked at a strategy to pull the cloud and pipe together to allow for full integration between the two. We are very well suited to take advantage of that.”
As TWC evolves towards operating as a full Multi Service Operator (MSO), Meeks says he is “looking at the next big wave of opportunity in the carrier space”. The company has already held discussions over the development of small cells, and offering the technology as part of a bundled package. Meeks claims carriers are already facing issues over a lack of capacity and coverage to meet customer demands.
“We have the capability to bundle several elements together and we actually have a lot of assets that wireless providers do not,” he says. “We have things that are mundane and simple, such as building access agreements, technicians and engineers that physically maintain our network.”
These sorts of capabilities leave a company like TWC perfectly placed to maintain small cell devices attached to the network and provide turnkey solutions, according to Meeks.
“We can monetise the value of this solution and one of the biggest things we have been focussing on is finding the next cell tower backhaul,” he says.
The long haul
After running 18 marathons in 18 years, Meeks knows a thing or two about longevity. An industry veteran, Meeks has over 30 years of experience under his belt, both in cable and telecoms. His previous roles include five years running Cox Business, as well as18 years at MCI.
It is Meeks’ experience in the cable market that could in particular prove invaluable in the long run. Meeks concedes that the largest growth for the company in the future is unlikely to come from residential cable, as the rise of video-on-demand services and OTT continues to take its toll on the industry.
“Residential cable is still healthy. It’s just not growing like it used to,” he says. “There are too many alternatives for consumers to get access to content. Competition is good and, of course, Netflix is a threat. But we haven’t given up – we continue to invest in platform and products and greater reliability on that side.”
Meeks’ focus will revolve around the growth of his business services division, however, and closing the deal with Comcast will be integral to that.
“The deal going through will be huge for us,” says Meeks. “We will aim to position the company as a single technology provider that addresses enterprise customers and multiple location providers to provide scale and simplify our offering. Comcast has similar strategies, and the deal works for both parties.
Does the deal work for John Malone?
“He’s not our concern,” says Meeks.