Comcast/Midwest Cable Transfer of Franchise

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Presentation transcript:

Comcast/Midwest Cable Transfer of Franchise City of Hastings, Minnesota January 20, 2015 Brian T. Grogan, Esq. (612) 877-5340 Brian.Grogan@lawmoss.com

Comcast/TWC Merger Comcast merger with Time Warner Cable Announced February 12, 2014 Comcast acquires TWC’s 11.4 M cable subs Results in Comcast controlling 34 M cable subs Requires local, state and federal approvals Comcast voluntarily offers to divest subs Comcast seeks to shed 4 M cable subs Comcast seeks to get down to 30 M cable subs

Comcast TWC 34 million subscribers

Pre-Merger Cable Markets

Comcast / Charter Comcast and Charter Communications Announced April 25, 2014 Comcast to sell 1.4 M cable subs to Charter Comcast and Charter to swap subs 1.5M to Charter 1.6M to Comcast

Charter Overview Charter operates cable systems in MN Duluth, St. Cloud, Marshall, Apple Valley, Lakeville, Rochester, Mankato, Winona and many others Charter provides service to 6.1 million subs In 29 states Charter is a Fortune 500 company Employs approximately 23,000 people

Midwest Cable 2.5 M subs to be divested to new entity Former Comcast properties in MN, MI, IL, IN, Al and others Twin Cities Comcast systems part of spin-off Midwest Cable – newly created entity After closing will be renamed “GreatLand Connections” Midwest Cable will be publicly traded entity New Grantee = Comcast of Minnesota/ Wisconsin, LLC Financial review – challenging Given lack of operating history

Proposed Charter + Midwest Cable (SpinCo)

Who Will Run Midwest Cable? Separate board of directors - owned 33% by Charter Communications 67% by Comcast Shareholders Midwest will initially have 9 board members Michael Willner President and CEO of Midwest 40 year veteran Insight Communications No existing franchises under its control Much of executive team worked at Insight Midwest has no operating history Substantial operations handled by Charter

Structure After Merger Charter Stockholders (as of immediately prior to the transactions) New Charter Charter Comcast Shareholders (as of the record date for the spin-off) TWC OpCo (owns the Midwest Cable systems, assets and liabilities relating to the Midwest Cable systems and credit facilities) Comcast (including cash distributed from OpCo and our notes issued to Comcast) Midwest Cable Approximately % Approximately % Approximately 67% Approximately 33%

Timeline for Local Action City has right to review transfer of franchise Under franchise, state and federal law Approve/not approve Official request via FCC Form 394 Received June 18, 2014 120 days to issue local decision October 18, 2014 = initial deadline Comcast extended deadline - First to December 15th, then January 15th New deadline – January 30th Legal, technical and financial qualifications City requested substantial info

Local Operations Local field operational (technical) personnel Will be Midwest Cable employees Government affairs personnel Interacting with local franchising authorities Other operational services Will be provided by Charter personnel

Charter Services to Midwest Midwest will pay Charter 4.25% of revenues 4.25% of all voice, video and data revenues Procurement and Programming Management Services Network Operations Engineering & IT Voice Operations Field Operations Customer Service Billing & Collections Marketing & Sales Administrative and Back office Services Other

Impact on Services Subs keep Comcast telephone numbers Subs keep cable equipment At least for initial transition – perhaps longer/permanently Email Subs will have to transition away from comcast.net Likely to Charter’s email domain Billing Will transition to Midwest Online payments will require subscribers to contact bank

Financial Review Outlined in Report pp. 13-20 Midwest’s long-term debt is estimated to be $7.8 billion Midwest’s initial debt leverage will be no greater than 5.0x its 2014 EBITDA Earnings before interest, taxes, depreciation and amortization i.e. how much profit is made with present assets and operations on the products sold, as well as providing a proxy for cash flow Consistent with some other cable operators Charter at 5.0x, Cablevision at 5.3x, Suddenlink at 5.7x and Mediacom at 5.3x).

Resolution Approves transaction subject to: Written Acceptance by New Grantee Comcast of Minnesota/Wisconsin, LLC Guaranty by GreatLand Connections Inc. New name for Midwest Customer service Quarterly meetings with New Grantee for 2 years Escalated complaint process maintained Reimbursement of all transfer costs

Questions? Brian T. Grogan, Esq. Moss & Barnett, A Professional Association 150 South Fifth Street, Suite 1200 Minneapolis, MN 55402 (612) 877-5340 phone / (612) 877-5031 facsimile E-mail: Brian.Grogan@lawmoss.com Web site: www.lawmoss.com