SpinCo Puts Its Wheels In Motion

TIME WARNER CABLE FINANCE EXECUTIVE JOINS WILLNER IN C-SUITE
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SpinCo, the soon-to-be publicly traded cable operator that will include about 2.5 million subscribers from Comcast, Time Warner Cable and Charter Communications, has started to assemble its management team, recently hiring a chief financial officer, but analysts are still in the dark regarding the new pure-play cable operator’s plans.

SpinCo had earlier tapped former Insight Communications cofounder and CEO Michael Willner to head up the company, which will spin off after the closing of the pending $69 billion Comcast-Time Warner Cable merger.

The awkwardly named company has hired Time Warner Cable vice president and treasurer Matthew Siegel as chief financial officer and still has other key hires to make. Some have speculated Time Warner Cable chief operating officer Dinni Jain is a prime candidate to take a similar role with SpinCo — he was formerly COO of Insight Communications and has intimate knowledge of most of its systems. Others believe Jain could seek a more permanent position with either another cable company or a private-equity firm looking to expand in the cable business.

Siegel has a history with Spin- Co’s assets and its management: Before joining Time Warner Cable, he was vice president and assistant treasurer at Time Warner Inc. and had earlier served as senior vice president of finance and treasurer of Insight under Willner.

Willner, who praised Siegel’s appointment in a statement, could not be reached for comment.

Whatever the outcome, SpinCo — which will presumably change its name before it is officially launched — will include some big markets like Detroit, Minneapolis and Indianapolis.

The company, which up0n its debut will be the fifth-largest U.S. cable operator behind Cablevision Systems, isn’t expected to be a consolidation engine, at least early on.

“I think Charter will be the primary driver of consolidation in the cable industry and that within four years, SpinCo will be a part of a much-larger Charter,” Pivotal Research Group principal and senior media & communications analyst Jeff Wlodarczak said.

MoffettNathanson principal and senior analyst Craig Moffett said SpinCo will be a substantial publicly-traded cable operator, but the market is expecting Charter to be a major factor in further industry consolidation.

“It’s hard to envision [SpinCo] as being a real driver of consolidation,” Moffett said. “It looks like it is designed to eventually be acquired itself.”

SpinCo will be 33% owned by Charter and operate under the larger company’s programming contracts. It will pay Stamford, Conn.-based Charter a management fee.

After four years, Charter has the opportunity to increase or decrease its stake.

Moffett said that despite losing out to Comcast in its pursuit of Time Warner Cable, Charter is expected to use its considerable financial muscle to acquire smaller cable operators.

“It’s hard to see anybody else doing that now,” Moffett said. “It’s hard to see Cox [Communications] be willing to be as financially aggressive. Charter has to be the odds-on favorite.”

Potential targets could be Mediacom Communications, Suddenlink Communications, Bright House Networks and Cable One, he said.

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