Insight Facing Decisions

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With its four-year-old partnership with Comcast heading for dissolution, the next question is what happens to the nearly 640,000 subscribers retained by Insight Communications.

Insight and Comcast officially announced the breakup of their Insight Midwest partnership, which contains virtually all of Insight's 1.3 million customers, on April 2. The deal — first reported by Multichannel News on March 29 — will give Comcast 684,000 customers in Illinois and Indiana. Insight will retain 639,000 customers in Kentucky, Indiana and Ohio.

Comcast, which inherited the 50-50 Insight Midwest partnership as part of its November 2002 purchase of AT&T Broadband, had the right to dissolve the partnership as of Dec. 31, 2005. With the deal, expected to close by the end of the year, Comcast will increase its total subscriber base to nearly 25 million customers.

Insight, which went private in a $720 million deal in 2005 with private-equity firm The Carlyle Group, now has to decide whether to go it alone as a midsized cable company or to sell out.

Insight CEO Michael Willner — who co-founded Insight in 1985 with chairman Sidney Knafel — wouldn't let on to the company's future plans, but added that its options are being evaluated.

“We're focused on running our business right now and moving toward a smooth and speedy transition to Comcast,” Willner said. He declined to comment whether the systems that Insight will retain will continue to be part of Comcast's programming agreements.

Most analysts believe that Insight and Carlyle will look to sell the systems, most likely to Time Warner Cable which has several large clusters near the remaining Insight properties.

In its 10-K annual report, Insight valued Comcast's 50% equity stake in the partnership at between $1.1 billion and $1.8 billion. Given that range, and assuming the $1.3 billion of debt Insight will take on, Insight's half should be valued at between $2.4 billion and $3.1 billion. Placing a value per subscriber of between $3,500 and $4,000 — the mid-range for systems — and the value of Insight's 639,000 customers becomes between $2.2 billion and $2.6 billion.

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