Comcast (CMCSA) will abandon Detroit if it’s plan to acquire Time Warner Cable Inc. is approved by the Federal Communications Commission. The cable giant filed a response (PDF) to parties objecting to the nation’s second largest provider’s plan to acquire TWC arguing against claims that it would grow too big under the merger.
Under its purchase plan, Comcast will withdraw from some markets, continuing to operate, as it does now, in 16 of 20 top markets, only a different set of 16 mostly on both coasts. Comcast lawyers stated, “Comcast will no longer have a presence in the Detroit, Minneapolis-St. Paul, or Cleveland DMAs (designated market areas).”
MLive explains that companies like Dish Network, Netflix and various TV networks have complained that the Comcast-Time-Warner merger would create a new, massive cable company with an anti-competitive advantage. Religious television programmer My Christian TV complained that the deal would make Comcast “the only significant cable outlet in approximately 98 percent of all African-American communities in the country.” Comcast’s response:
Comcast has never served several markets with significant African-American populations such as St. Louis, Cleveland, and New Orleans, among many others, and after the Transaction, will no longer serve Detroit… Comcast estimates that after the transaction, it will serve markets that include approximately 78 percent of the country’s Hispanic households (not counting Puerto Rico in the denominator), though of course many of those households will not be Comcast customers.
Bloomberg says the castaways in Detroit, Minneapolis and elsewhere would belong to a new company, GreatLand Connections Inc., to be created in what the companies call a tax-efficient spinoff. The new company’s debt would exceed industry averages — something that has raised concerns about service in those communities.
“We don’t have the answers we need,” said Ron Styka, an elected trustee with responsibility for cable-service oversight in Meridian Township, Michigan, a town served by Comcast about 80 miles west of Detroit. Municipal officials told Bloomberg they have questions about service, including whether subscribers can keep Comcast e-mail addresses or if the cable-channel lineups may change.
GreatLand will start with $7.8 billion in debt, according to a securities filing. Bloomberg says that debt is equal to five times Ebitda, or earnings before interest, taxes, depreciation and amortization. The debt ratio for Comcast is 1.99 times Ebitda and for New York-based Time Warner Cable it’s 3.07 times Ebitda, according to data compiled by Bloomberg. David Osberg, city administrator of Eagan, MN told Bloomberg. “It’s not clear whether GreatLand will be financially qualified,” to provide services.
The new company will buy management services from Charter Communications Inc. (CHTR) according to Bloomberg. Charter, which had sought to buy Time Warner Cable, would own a 33 percent interest in GreatLand and become the second-largest U.S. cable company with more than 8 million customers counting GreatLand’s and subscribers it gets in purchases and swaps with Comcast after the merger is completed.
I worked a couple of jobs last year with Comcast last year and it always took them 3 or 4 months to provide service to business customers so many Detroiters may not be sad to see the cable giant go. The Philadelphia company last week acknowledged major customer service woes after a series of viral videos documented the experiences of exasperated customers.
Comcast CEO Neil Smit announced the hiring of a new head of customer service, and wrote in a blog post:
It may take a few years before we can honestly say that a great customer experience is something we’re known for. But that is our goal and our number one priority.
Ralph Bach has been in IT for fifteen years and has blogged from his Bach Seat about IT, careers and anything else that catches his attention since 2005. You can follow me at Facebook and Twitter. Email the Bach Seat here.