Time Warner Cable (TWC) has only been a public company for under two weeks and some analysts are already saying that they need to expand and increase their size to be able to compete with Comcast (CMCSA), AT&T (T) and Verizon (VZ). Time Warner currently is the second-largest cable company in America with 13 million television subscribers, second only to Comcasts' 24 million.
The one advantage to scale is that they would be able to get better rates on their television content. The greatest pressure on cable companies concerning margins has been the increasing costs of programming and keeping those under control is a key to growing profits.
Some of the companies considered possibilities for Time Warner Cable to buy are Cablevision (CVC), Charter Communications (CHTR) or Cox Communications.
Time Warner (TWX) still maintains 84 percent share in Time Warner Cable, with 16 percent of the stock offered to the public for trading.
“Time Warner Cable shares will be boosted this year through the effective integration of the Adelphia systems and the success of the triple play offering. This will be a prerequisite before its newfound currency can be used to ultimately consolidate the smaller cable companies in the industry,” says Aryeh Bourkoff, analyst at UBS.
Like all cable companies, the one advantage that Time Warner Cable has is their ability to offer "triple play' packages where consumers can purchase bundled access to cable, broadband and telephone services. The telecom companies are entering the television business quickly so they can compete on this level. A major reason people left the sector because of concerns over price wars that may develop so that companies can gain more market share.
Still for now, cable companies should enjoy a season of time before these competitive forces hit them, for now they should do pretty good for the next couple of years, Time Warner Cable included.
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