Parsing Time Warner Cable’s DukeNet Buy

October 11th, 2013 by · 2 Comments

Ok, so the week started off with a bang in the competitive fiber world as Time Warner Cable emerged as the winning buyer for DukeNet’s Carolinas footprint. The dust has settled a bit, so here’s a quick look at a few thoughts.

  • Why DukeNet rather than tw telecom? DukeNet’s a great asset, but as many have pointed out TW Cable’s natural target has always been tw telecom. A solid chunk of the core of tw telecom’s metro footprint runs off of conduit/fiber leased from its former sibling, which would make the synergies obvious. And tw telecom’s customer base is much more geared toward the customers that TW Cable wants to target. I can only assume that they pounced on DukeNet because it was going to be sold regardless, while tw telecom isn’t looking for a buyer. That said, if TW Cable is ready to buy substantial independent metro and regional fiber, they have the firepower to sweep tw telecom’s shareholders off their feet should they choose to do so.
  • Nice Payout for Alinda Capital. As I recall, Alinda Capital Partners bought its 50% of the company three years ago for some $137M and a supposed 8x multiple. This week’s $600M price tag suggests they’ll finish up with something around $300M. I’d say that was a pretty successful foray into the fiber business.
  • Where were the independent buyers backed by private equity? Zayo and Lightower seemed like logical buyers to me, but apparently they were simply outbid. Whether TW Cable’s synergies were better enabling them to build higher or their motivation was simply greater is hard to tell at this point. But the lesson I take home is that if the cable MSOs are serious about the idea, they have the resources to sweep up assets in this sector.
  • The surprise factor is now gone. Any further moves by cable MSOs on metro fiber will be seen as following the new trend from here. That said, what could be the likely followups?
    • Would Comcast really want to buy an asset like Zayo or Level 3?  I still find this hard to swallow.
    • Might Cablevision go after Lightower and take Optimum Lightpath beyond the NY metro area?   Actually, this makes sense to me.
    • What kind of assets would make sense for Cox or Charter? More market-specific targets like the EasyTel deal seem more likely than anything with national scope.
  • All cable MSO roads seem to lead back to tw telecom – The thing is, the most logical metro fiber target I see for *all* the cable MSOs would be tw telecom.  It’s network and customers are the closest fit to what they’d want to do in the enterprise space, and yes TW Cable probably would have the inside track due to past history and such.

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Categories: Cable · Mergers and Acquisitions · Metro fiber

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2 Comments So Far

  • David Rohde says:

    Interesting as always. The cablecos’ increasing engagement with enterprises validates your analysis. See my views (I’m a procurement & benchmarking consultant working exclusively with enterprises) at – on the topics cloud click on Cable Companies, TW Telecom, XO, Zayo, etc.

  • Anon says:

    I was surprised that Dukenet was sold this early. It seemed like they left value on the table since most cell tower bandwidth growth is still to come. I wonder if they were looking at significant network upgrades to support their backhaul growth and needed capital to support. Most of the revenue for a company like Dukenet from bandwidth growth drops to the bottom line.

    With 3500 towers I would imagine their cash flows from their tower portfolio will be significantly different when the carriers are pulling 300Mbps per tower down.

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