National cable giant Time Warner Cable, which operates in many areas in Central Kentucky, announced Monday that it will acquire Insight Communications, the largest cable operator in Lexington and Kentucky, in a $3 billion deal.
Many in the industry have long expected the deal, given that Insight's operations are so close geographically to some of Time Warner Cable's and that Insight's ownership shopped the company around in 2007.
In general, customers probably won't see much of a difference in how the operations are run, considering the many similarities in cable, Internet and phone products offerings, said Mike Farrell, senior finance editor at Multichannel News, a cable industry trade publication.
An Insight spokesman, Jason Keller, said the sale grew out of a regular review of the company's strategy, which also could have led to Insight making acquisitions or staying with its current ownership.
For example, last year's review led to then-private equity owner The Carlyle Group selling a major stake to the two additional private equity firms. The Carlyle Group sought to sell Insight in 2007, but as the economy was weakening, it did not find a buyer willing to meet its price, media reports suggested at the time.
The current ownership had sought $3.5 billion to $4 billion for Insight, according to some media reports.
"It works out to be a good deal for everybody involved," Farrell said. He said it's a solid price for Insight's current ownership, and Time Warner Cable spokesman Justin Venech said the acquisition brings in a "well-run business" at "an attractive price."
Farrell complimented Insight's management but said that things have stalled lately.
"It's a question of whether they've hit a wall with subscriber growth and product growth because they've been so good, or is it because this auction process took their eyes off things a little bit?" Farrell said.
He said Time Warner Cable appears to be counting on growth by encouraging customers to move into higher-priced tiers and by focusing on business customers.
In announcing the deal, Time Warner Cable said it expects to save $100 million annually in programming expenses and other cost reductions, with the bulk of savings coming within two years of closing the deal.
One particular question mark in the deal is Insight's CN|2 statewide network, which was launched in 2010 and provides coverage of weather, state politics and sports.
Venech declined to address the future of the channel.
Farrell, though, said it's likely that CN|2 will stay.
"Time Warner has a bunch of locally produced news channels on its other systems," he said. "It's a big differentiator for cable, especially in those markets where there's a lot of news. I wouldn't see them trying to get rid of it at all."
Cable customers won't have to worry about switching to a new type of mini-box, the device used by Insight to help the network go all-digital last year.
"One of the things we like about this transaction is they have already done it," Venech said. "We're not looking to do it again."
The announcement Monday already had some Lexington residents worried about pricing.
Donna Cooke said that her sister and children are both Time Warner Cable subscribers, and they pay between $31 and $44 more monthly for packages identical to or similar to her subscription package through Insight.
"I'm just worried about the money and what channels will differ," she said.
Venech declined to address changes in prices and channel offerings, saying more details will come near the time the deal will close, which is estimated to be the first half of next year.
He did say, though, that customers concerned about Time Warner Cable's service should know that the company is "putting forth a great effort right now to improve our customer service."
"We are aware of what the reputation is, and we are making efforts and strides to improve that," he said.
The deal requires a number of regulatory approvals, including the approval of the Lexington-Fayette Urban County Council.
Insight's franchise with the city runs through September 2012, and negotiations have not yet begun on renewal, said Susan Straub, press secretary to Mayor Jim Gray.
At that time, the franchise will again be up for bidding to other cable operators, but approving a transfer of control from Insight to Time Warner Cable will not involve bidding, she said.