Comcast and Time Warner Cable will have the better part of the next 10 months to sell regulators on their proposed $69 billion merger, but last week two of the companies’ top financial executives made their pitch to investors, using a somewhat surprising metric — business-services growth.
The combined Comcast and TWC generated a combined $6 billion in business-services revenue in 2013, but that is expected to more than double to $12.1 billion in the next five years. Fueling that growth will obviously be the inclusion of the top two business telecom markets in the U.S. — New York and Los Angeles — which should help Comcast crack the elusive large enterprise market.
But according to MoffettNathanson principal and senior analyst Craig Moffett, the combined Comcast-TWC will have access to 23 of the top 25 DMAs, and 43 of the top 50 DMAs, which should make its offering more attractive to multi-location businesses and for backhaul carriers.
At the Morgan Stanley Technology, Media & Telecom conference in San Francisco last week, Comcast vice chairman and chief financial officer Mike Angelakis noted that most of Comcast’s business-services revenue — about $3 billion — comes from firms with fewer than 20 employees.
While the company has made some headway in medium- sized businesses with less than 250 employees — generating about $600 million in annual revenue and growing — TWC could help it crack the Enterprise segment, or large businesses with more than 250 employees. “The Enterprise side is one we haven’t begun to move into,” Angelakis said.
For Time Warner Cable, chief financial officer Artie Minson noted at the same conference last week that the addition of Comcast’s bulk will help it tackle the medium-sized business segment. But he added that TWC has a vast untapped market in the segments it already is in.
Minson estimated that TWC has about 850,000 office buildings on network in its footprint, providing services to about 70% of those buildings. Within the buildings in which it provides service, TWC captures about 20% of the telecom revenue generated in each facility.
“So we have an opportunity [to] not only sort of new build but to go back and harvest that existing build that we’ve done,” Minson said, adding that TWC plans to spend about $500 million a year on line extensions for new buildings, which should add another $1.3 billion in serviceable revenue opportunity each year.
