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Cable Technology Feature Article

August 15, 2011

Time Warner Expands Midwest Footprint with Insight Acquisition

By Beecher Tuttle, TMCnet Contributor

Time Warner (News - Alert) Cable confirmed widespread rumors early Monday morning by announcing its intention to acquire fellow cable operator Insight Communications for $3 billion in cash.

The deal, which will merge the nation's second- and ninth-largest cable companies, will widen Time Warner's footprint in the Midwest by adding more than 750,000 customers in Indiana, Kentucky and Ohio. Insight provides Internet, video and voice services to both residential and business customers.

Time Warner anticipates that the deal will help create cost efficiencies and limit capital expenditures for its Midwest operations. After incurring onetime costs, Time Warner expects the deal to generate around $100 million in annual cost savings, the majority of which will be associated with lower programming expenses.

“We believe in our business and its long-term prospects and have long thought that Insight's well-run, technologically advanced systems would fit well with our Midwest operations,” Glenn Britt, chairman and CEO of Time Warner Cable, noted in a statement.

Purchasing Insight is a bold move for Time Warner, which lost a whopping 130,000 residential video subscribers in the second quarter of 2011, according to Bloomberg, which was first to report the deal. Time Warner and other large rivals have been working to acquire smaller operators in an effort to respond to increased competition from telecom companies and alternative content providers like Netflix.

“Keeping up the scale is quite important for the cable companies because they are able to leverage the scale in terms of the number of TV subscribers they have when they are making deals with the content owners,” Richard Broughton, an analyst at IHS Screen Digest, told Bloomberg (News - Alert).

Overall, U.S. cable and satellite providers combined to lose nearly 600,000 subscribers in Q2, representing the biggest one-time dive in the history of the industry.

The all-cash deal is subject to FCC (News - Alert) and franchise approvals.

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Beecher Tuttle is a TMCnet contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.

Edited by Jennifer Russell