C3’s thoughts on Comcast/Time Warner Cable Merger

We have quite a few years of telecom experience here at C3 and have seen quite a few mergers and acquisitions – WorldCom buying MCI, Sprint buying Nextel, Centurylink acquiring Qwest, etc. This is our general view on telecom companies merging together – it typically provides very little, if any benefits to end user business clients. We typically see very negative consequences stem from mergers, especially those of carriers this size. Why is that?

1. Integration of systems – Comcast will spend several years integrating every single layer of business at Time Warner Cable – customer support, sales teams, product sets, billing, NOCs, etc. That integration typically has negative effects on the customer experience throughout the transition from 2 company platforms to 1. We typically see longer installation timeframes, more billing errors, and a generally higher level of customer dissatisfaction when dealing with a company that is being acquired. The negative consequences on the majority are felt on the acquired company side vs the acquiring company side(with the exception being the SBC/AT&T merger).

2. Internal focus instead of customer focus – It takes such a tremendous effort to merge companies of the sizes of Comcast and Time Warner Cable. The merger efforts we’ve seen in the past tend to shift focus and resources away from customer centric activities to merger/integration efforts. One can argue that this point is the single biggest reason Sprint has suffered years of continual sliding. Their merger with Nextel was so fraught with technological and company integration issues that focus on the customer was seemingly lost(We do see Sprint trending slightly positively now).

3. Acts as an inhibitor to innovation – With less competitors comes less innovation. The impact here is slightly less than your typical M/A behavior because these companies don’t service overlapping geographies. With that said, more overall competition typically spurs innovation as companies continually look to differentiate themselves and their offerings.

Other than the scenario of avoiding bankruptcy and service interruptions, we have a negative outlook as it pertains to innovation and customer service.

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