By Shalini Ramachandran
Cablevision Systems Corp. Chief Executive James Dolan said he
wants to consolidate the New York cable and broadband market, a
proposal that would add a new dimension to the rampant talk of
deals in the wake of Comcast Corp.'s failed purchase of Time Warner
Cable Inc.
On stage with fellow industry CEOs at the National Cable &
Telecommunications Association annual show in Chicago on Wednesday,
Mr. Dolan publicly lobbed the idea of a deal with Time Warner Cable
to consolidate the New York market, where Cablevision operates.
"I think consolidation of that marketplace would provide a great
deal of ingenuity and more access to resources for customers and
lower prices," Mr. Dolan said.
In response, Time Warner Cable CEO Rob Marcus quipped, "I'm not
sure if I got asked out on a date or to get married."
"I think I'm proposing a commune," Mr. Dolan responded. If New
York cable operated like one market, it would be easier to deploy
technologies like Wi-Fi in a seamless and ubiquitous way for
consumers, he said. Plus, it would provide "a lot of opportunity
for innovation." Mr. Dolan said he wants to talk to Time Warner
Cable and Comcast, which serves parts of New Jersey, about ideas
for combining the regional footprint.
Cablevision has 3.1 million total customers for video,
high-speed Internet and phone service throughout the New York
metropolitan area, while Time Warner Cable serves about 15 million
customers across the country with a big concentration of
subscribers in New York and Los Angeles. Verizon FiOS also operates
in New York, overlapping with Cablevision in more than half of its
service area.
Mr. Dolan's proposal, which was scant on details, sparked
speculation about whether Cablevision is setting itself up as a
seller or wants to buy some of Time Warner Cable's regional assets.
Investors sent Cablevision shares up as much as 7.6% after his
comments.
Any talks about a combination involving Cablevision would add a
new wrinkle to the cable-consolidation discussion. Charter
Communications Inc., run by former Cablevision executive Tom
Rutledge, has been reaching out to Time Warner Cable about a
possible friendly merger since Comcast abandoned its deal plans.
Meanwhile, The Wall Street Journal has reported that Time Warner
Cable has been making its own deal overtures to the smaller
operator Bright House Networks LLC.
Industry analysts, including MoffettNathanson's Craig Moffett,
said they believe Mr. Dolan was asking Time Warner Cable to acquire
the company, given that Cablevision executives have made it clear
over the past year that they aren't in the market to buy additional
cable assets.
"Selling would be his only realistic option," Mr. Moffett
said.
But how realistic of an option is another question. Mr. Moffett
said that Cablevision would be a tough sell because of its
"sky-high" valuation and the fact that it competes with Verizon
FiOS's fiber-optic network. Cablevision shares are up 24% in the
past year, giving the company a market value of $5.8 billion.
"Consolidating New York makes a good sound bite, but it is very
hard to envision any other cable operator wanting to increase their
exposure to Verizon FiOS to the extent that would come with
Cablevision," Mr. Moffett said.
In an interview with CNBC after the panel, Mr. Dolan said that
he hadn't discussed the idea with Mr. Marcus before suggesting the
consolidation idea on stage.
"It's like anything else--we're interested," Mr. Dolan said.
"They'd have to see the value in it, too. I think it's there."
On stage at the conference, Charter CEO Tom Rutledge agreed that
consolidating local markets makes sense because of the scale
opportunities.
"I feel like I'm on Match.com," said Cox Communications
President Pat Esser. "I feel like we're all trying to update our
relationship status right now."
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
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