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Comcast planning to exit central Indiana cable market

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Most of Indiana, including the Indianapolis area, will lose Comcast Corp. as its cable provider if the company receives approval for a new plan to ease the regulatory process for its merger with Time Warner Cable Inc.

Stamford, Conn.-based Charter Communications Inc. said Monday that it has reached an agreement to take control of 3.9 million of Comcast's customers under a plan that will create a new cable-TV company in central Indiana.

In the first step of the three-part agreement, Charter said it will buy 1.4 million Time Warner Cable customers for $7.3 billion after the merger of Comcast and Time Warner Cable closes. Charter will also form a holding company to acquire a 33-percent stake in a spinoff from Comcast that will pick up 2.5 million Comcast customers. The companies will also swap 1.6 million customers apiece.

The new holding company, now known as SpinCo, will take over 2.5 million Comcast cable customers in Indiana, covering most of the northern part of the state. According to a map released by the companies, Indianapolis and Fort Wayne will fall under the SpinCo territory.

The southern part of Indiana, including Evansville, will be taken over by Charter.

Comcast said the transition wouldn't take place until after the merger is finalized, which it hopes will occur by the end of the year.

Comcast spokesman John Demming said there have been no formal names suggested yet for SpinCo or a decision on where the company will be based.

Charter spokesman Alex Dudley said “it’s impossible to say what the new company is going to look like at this point.” But, because Charter would manage the SpinCo, there is a good chance some of the content offerings will be similar to those offered Charter customers, he said.

“I can’t say exactly what you’ll see, but the average customer is probably going to see a lot of similarities to what they have now,” he said. “Ultimately you’ll be able choose from a lot of packages that offer phone, Internet, TV, and on-demand services.”

Charter said it has a library of about 10,000 on-demand titles. Comcast has more than 35,000 through Xfinity.

The arrangement could help Philadelphia-based Comcast appease critics of the $45 billion takeover of Time Warner Cable by reducing the combined company’s market share to less than 30 percent. After Comcast thwarted Charter’s earlier attempt to acquire Time Warner Cable, Charter is also saving face with a transaction that will make it the second-largest U.S. cable operator.

“Despite what may be some lingering bad blood between Comcast and Charter, this deal illustrates that these companies can work well together to efficiently consolidate the cable-TV industry,” said Paul Sweeney, an analyst for Bloomberg Industries.

Shares of Charter rose 7.7 percent, to $140 each, Monday morning. Comcast shares were up less than 1 percent, to $51.40.

Shareholders of Comcast and the former Time Warner Cable will own 67 percent of the new spinoff, while Stamford, Conn.-based Charter will manage the entity. The spinoff is estimated to have an enterprise value of $14.3 billion and an equity value of $5.8 billion, according to slides disclosed in a regulatory filing.

There is a standstill as part of the agreement, in which Charter has agreed not to acquire any shares of the spinoff for two years and not to acquire shares that would cause it to own more than 49 percent of the spinoff for two years after that, said Alex Dudley, a spokesman for Charter.

Charter will likely buy the rest of the spinoff after the four-year period, and can do other deals in the meantime, Craig Moffett, founder of research firm MoffettNathanson LLC, said Monday.

A new publicly traded company will own all of Charter and 33 percent of the spinoff company. Charter will issue about $2.1 billion in equity to shareholders of the new spinoff.

“The transactions announced today will provide Charter with greater scale, growth opportunities and improved geographical rationalization of our cable systems, which in turn will drive value for shareholders and more effective customer service,” Charter CEO Tom Rutledge said in Monday’s statement.

Charter’s new footprint will be easier to operate and have faster growth, Rutledge said on a conference call to discuss the deal. The company will now have about 5.7 million subscribers plus the management of another 2.5 million through the spinoff company, helping it oversee a total of 8.2 million video customers. That’s almost double its previous reach.

With the asset swap, Charter will gain systems in Ohio, Kentucky, Wisconsin, Indiana and Alabama, while divesting systems in California, New England, Tennessee, Georgia, North Carolina, Texas, Oregon, Washington and Virginia.

The spun-off company will own systems that are near Charter’s existing footprint in Michigan, Minnesota, Indiana, Alabama, Tennessee, Kentucky and Wisconsin.

“What we like about the deal is at the end of the day Charter spends less than $20 billion to double its subscribers while also dramatically improving the operational efficiencies” by clustering Charter subscribers in the same geographic areas, Richard Tullo, an analyst with Albert Fried & Co., wrote in a note Monday.

Charter CEO Rutledge will be chairman of the new spinoff, which will have nine board members, three of whom will be Charter executives.

The agreement marks the end of weeks of discussions between Charter and Comcast and puts them both on a path to reaching more subscribers after the traditional U.S. pay-TV market lost customers for the first time last year. Rutledge has envisioned expanding through acquisitions to help the cable company negotiate for better deals on programming and boost profit.

Charter also said Monday that it captured more TV customers on its own in the first quarter, according to a separate statement. Residential video customers rose by 18,000, beating the 5,000 additional TV subscribers projected by Philip Cusick, an analyst at JPMorgan Chase & Co.

Charter’s net loss narrowed to $37 million in the first quarter, or 35 cents a share, from $42 million, or 42 cents, a year ago. Sales rose to $2.2 billion, compared with the $2.18 billion analysts predicted on average.
 

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  • Second Tier Service Coming
    If it's anything like the divestiture that happened when Verizon gave the Fort Wayne market to Frontier, the offerings will plummet. It will be like moving from a 1st World country to a 3rd world country. You will read about all the neat things you used to have, and the new things being developed and be unable to enjoy them anymore.
  • When Corporate Greed and Federal Regulations meet...
    Customers get screwed. Is Comcast perfect? No. But the actual services provided are the best in Indiana. But no, to appease the feds and satisfy their greed they're kicking us Hoosiers to the curb.
  • Malone
    When will John Malone take things back over again?
  • amazing
    The Comcast Time warner deal hasn't even be given the OK yet, and Comcast is going ahead with their plans.
  • ARGH! The X1 Platform ROCKS
    Well, I am all about getting some competition in here but this is the exact opposite. I worked for Comcast many years ago and I know people complain about their CS, but I really don't think it is that bad. Don't get me wrong, if I call at night, I will be forced to talk to some person with a thick accent from the Philippians, but at least we had a great variety of channels. I guess if we are going to be forced into using another company, I will be canceling and getting Internet only and using my Netflix and Amazon accounts for my TV watching needs. I am REALLY PISSED that Comcast is ditching us after all these years. Why Indiana? Indianapolis used to be the main hub for Comcast, but they let most of the people go here and moved to Michigan so they could cash in on some incentives being offered by the state for hiring individuals on unemployment. Politics. It's all about politics and what palm is being greased. Meanwhile the consumer suffers.
  • Indiana Headquarters?
    Gov. Malloy: Charter Communications Moving Corporate HQ From St Louis MO To Stamford CT http://newyork.cbslocal.com/2012/10/02/gov-malloy-charter-communications-moving-corporate-hq-to-stamford/
  • Look Up to the Roof
    I threw cable out the window four years ago. For about $50 you can get a good antenna and receive about 25 channels. Any electrician can install it for those who don't have the ability to connect it. You'll save a bunch and not pay for channels you never watch anyway.
    • Indiana HQ?
      It may be too soon to know, but is the new company going to be Indiana headquartered? It seems like it would be with most if not all of the 2.5M customers it manages being Indiana based. That would be a nice pickup on jobs as well as possibly better customer service. Can we get a follow up on this point?
    • Comcast Beats U-Verse But They Both Suck
      My wife and I have had Direct TV, Comcast, and ATT U-Verse. Direct TV had the best customer service but Comcast has been the best overall package. U-Verse sucks; my wife hates it. We were going to switch to Comcast next month and now we are not sure what to do. Lack of real competition, gimmicks, and long telephone waits are pervasive. Yuk!
    • It figures
      I worked for Comcast for a time and was always trying to overcome their lack of customer service. In that respect good riddance. Now then the Internet quality Comcast offers is second to none and I hate to lose that but change just doesn't often benefit the customer. With Comcast bailing on loyal 20+ year consumers all I can say is "it figures". Perhaps I will be able to talk to customer reps who actually speak English!
    • Looking at the services
      As was stated below, being switched over to Charter from Comcast is going to result in a downgrade of services for many subscribers. Fewer channels and fewer on-demand movie options. Plenty to complain about with them, but easily prefer their options and internet quality over Brighthouse and ATT.
    • Will we have a choice?
      Does this merger affect those of us with Brighthouse? Will we have a choice of internet/cable providers in the future?
    • Higher Prices, Slower Internet
      Too bad - we're going to pay more for significantly less. I don't even want to imagine the nightmares with streaming. Comcast at least cared about giving you as much bandwidth as you're willing to pay for. This is more like the Apple model - One option and one price for the generalized capability you seek, and that is all. The Internet will likely be terrible, and Charter has no incentive to improve the speeds. They're already faster than their competitor, UVerse, so they can easily spin that as a plus to the Feds. It isn't *exactly* anticompetitive since their competition isn't exactly trying to better themselves, either. These sorts of oligopolies need to be approved by voters, not government officials. If only we had a voice...
    • Comcast/Charter
      I was thinking about dumping Comcast anyway so this makes the decision easier and quicker..
    • Disagree
      We switched to Uverse from Comcast and in less than a year paid an ETF to switch back to Comcast. There is no comparison between the two. Much better internet speeds from Comcast and in the end were cheaper than Uverse for the same amount of television content but much better internet.
    • Worst company ever
      To think I was a customer of these bums for almost 20 years before I left them in 2006...without question, the worst customer service of any company I ever dealt with...I feel bad for those who have no other choice, this is a sorry situation for them ...as soon as U-Verse showed up, I was gone...is U-Verse perfect...nope...better than Comcast in every way...yes by a mile...and as for the Google fiber plea, the sooner the better.
      • Where is Teddy when you need him?
        Can you spell o-l-i-g-o-p-o-l-y?
      • Help is on the way
        Plea to Google Fiber: I'm begging you to get here much sooner than originally planned.
      • look at Charter, it just doesn't measure up
        Go out and look at www.charter.com and look at the package comparisons. It just doesn't measure up to what Comcast is/was offering. I'm not exactly a Comcast cheerleader, but what happens to those of us paying them for their somewhat newer X1 services? what about internet speeds, the fastest I see on Charter is 30 down with 4 up! that's a far cry from the tier levels Comcast offers. Talk about stronghanding customers!
      • What bout Brighthouse?
        What about those of us who live in the "Old "City of Indianapolis" and were mandated to have Brighthouse now? Can't remember what it was when cable first came in. Remember Marion County has two different cable zones.
        • Cutting up the territories
          In Hamilton County and Anderson areas, we used to have Insight Cable a few years ago. If something went wrong, you could call an office in Noblesville and they would take care of your need... or Anderson if that was closer to you. Then, Comcast took over the territory and nothing has been as good since then. From the above article, I can picture Comcast and Charter people sitting in front of a map deciding who gets what territory that will make them the most profits. NOTHING in any of the statements these companies make even remotely addresses the high costs of internet service (relative to the rest of the developed world) of the terrible service provided. It's all about how do keep under the threshold of Federal regulators and gain more control of the millions of subscribers who have no other alternatives. Approval of the Time-Warner /Comcast merger is a very bad idea as it further reduces any semblance of competition in cable service.
        • Local authority?
          At what point does the IURC and the City Cable Commission/Committee enter into the alleged merger regulatory authority? For many of us this is more than just transferring TV programs - our business rely on reliable internet high speed cable and telephone service.
        • NO!
          So let me get this straight. Due to the fact that Comcast and Time Warner want to merge they are going to send their Indiana customers down the river? What BS. Way to hit that customer service benchmark their Comcast.

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