Time Warner Cable to make a play in US metro market?

31 January 2013 | Richard Irving


Time Warner Cable could emerge as a major playmaker in the final round of consolidation set to sweep over the North American metro market, Capacity has learned.

The cable group, which unnerved Wall Street when it missed quarterly earnings targets last November, actively pursued negotiations with AboveNet for several weeks while the metro provider haggled with Zayo over the terms of a proposed $2.1 billion merger last Spring.

According to sources familiar with the auction process, Time Warner Cable was one of three cable companies to express a credible interest in AboveNet after chief executive William LaPerch hoisted the ‘For Sale’ sign last year.

The source, who declined to be named, added that Time Warner Cable remained “closely in touch” with advisers throughout the entire auction process, but eventually decided against tabling a formal offer.

Regulatory filings lodged shortly before AboveNet finalised a deal with Zayo confirm the presence of three cable companies in exploratory talks.

Like its peers, Time Warner Cable’s core video subscriber business faces a tough time amid mounting competition from rivals such as Verizon Wireless, prompting the company to focus on expanding its business services offering. Analysts see the acquisition of fibre assets as crucial to the cable group’s plans.

Historically, cable companies have avoided buying metro fibre networks for fear of contravening an unwritten gentleman’s agreement precluding them from competing head-to-head in each other’s geographical markets. But the pressure to expand into the high-premium enterprise market is forcing companies to look at bolstering their fibre footprints.

Shares in Time Warner Cable have surged more than one third in the last year to $100.70 at last night's close, raising hopes that the company might be able to justify an acquisition in the metro markets. Previously, private equity valuations had put many fibre providers beyond the financial reach of the cable sector.

For a full insight into all the M&A activity in the North American metro market click here.