View Full Version : Switch is Off on Cable Swap: Time Warner Chooses to Keep Its Kansas City Area ...

08-03-2006, 11:46 PM
(cont)...Customers Instead of Trading for Houston.

Aug. 3--Time Warner still loves Kansas City.

Time Warner Inc. on Wednesday said it isn't interested in a long-discussed deal with Comcast Corp. to trade cable customers in Kansas City for customers in Houston.

The announcement ends more than two years of speculation on the future of cable service in Kansas City and south Texas.

As a result, 300,000 Time Warner and 100,000 Comcast customers in the Kansas City area will see no changes in the operator of their cable services.

The two cable giants -- Comcast is the nation's largest and Time Warner is No. 2 -- share a 50-50 joint venture owning cable systems that serve 1.6 million customers in Kansas, Missouri, south and southwest Texas and a small part of New Mexico.

Under the ownership agreement, either company could trigger a clause after June 1, 2006, to dissolve the partnership. On July 3, Comcast pulled the trigger to begin that breakup.

However, under the agreement, the company that triggered the breakup gave up rights to choose which cities it would control when the venture was dissolved.

When those rights fell to Time Warner, the company chose to keep its operations in Kansas City and southwest Texas rather than Houston.

At least part of that decision was triggered by yet another Comcast action. As the company triggering the breakup, Comcast also had the right under the partnership agreement to distribute the partnership's debt.

Comcast placed the partnership's entire $2 billion debt on the Houston cable operation.

Time Warner said that action made the company's decision to choose Kansas City, Corpus Christi and other southwest Texas cities and drop Houston a matter of finances.

"The decision to select Kansas City and the systems in southwest Texas and New Mexico was driven by economic considerations stemming from the fact that the entire $2 billion debt from the partnership had been placed on the Houston properties," Time Warner said in a statement. "This decision is consistent with our strategy of expansion through acquisition of systems that are attractively valued."

Time Warner, in its statement, said both Houston and Kansas City "contain very attractive, well-managed cable properties."

Time Warner announced the agreement Wednesday along with the company's quarterly earnings.

"As a result of this transaction, Time Warner Cable will consolidate the results of those systems and receive a cash payment of approximately $600 million" from Comcast, Dick Parsons, chief executive of Time Warner, said in discussing the swap during a conference call with Wall Street analysts.

Comcast will take over operations in Houston, currently operated by Time Warner under the joint-venture agreement. It will assume the partnership's debt.

The announcement comes against a backdrop of corporate trading following the Comcast-Time Warner joint purchase of bankrupt cable provider Adelphia Communications Corp. for about $17 billion.

The two companies have traded cable operations in several cities as part of the deal to break up Adelphia's cable operations serving 5 million customers.

The Time Warner announcement Wednesday was a distinct turnaround from a little over a year ago. Comcast executives told financial analysts in May 2005 that Comcast probably would end up with the Kansas City cable operations after a swap with Time Warner.

That deal would have allowed Comcast to consolidate its current cable operations -- the company has about 100,000 subscribers in eastern Jackson County and Olathe who are not part of the joint venture -- with current Time Warner customers.

It also would have been beneficial for Time Warner, giving the company cable operations in Houston and Dallas.

Vibha Agrawal, a Comcast spokeswoman, said both Kansas City and Houston are good markets. Comcast "is thrilled to be in that market," she said of Kansas City.

"We remain focused on serving our current customers in Kansas City," Agrawal said.

The dissolution of the partnership is subject to regulatory and franchise review and approvals, Time Warner said. The transaction is not expected to close until early in 2007.


Reigster at SatelliteGuys