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Elliott Management raises position in Time Warner Cable

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Elliott Management and Time Warner Cable

Elliott Management increased its position in Time Warner Cable (TWC) by over $50 million. The stock represents 2.26% of the total portfolio in 4Q14, up from 1.89% in 3Q14.

TWC makes up 0.23% of the SPDR S&P 500 ETF Trust (SPY) and 1.85% of the Consumer Discretionary Select Sector SPDR Fund (XLY). SPY tracks the overall performance of 500 publicly traded companies in the growth sector. Meanwhile, XLY tracks the overall performance of 87 publicly traded companies in the consumer sector.

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Overview of Time Warner Cable

Time Warner Cable, or TWC, is among the largest providers of video, high-speed data, and voice services in the US. Its cable systems are mainly located in five geographical areas:

  • New York State, including New York City
  • the Carolinas
  • the Midwest, including Ohio, Kentucky, and Wisconsin
  • southern California, including Los Angeles
  • Texas

Comcast and TWC merger to be completed in early 2015

In February 2014, Comcast (CMCSA) agreed to buy TWC for ~$45.2 billion. This deal would create the largest cable provider in the US, with more than 33 million subscribers. The U.S. Department of Justice and the Federal Communications Commission, or FCC, are scrutinizing the deal. In order to win approval for the merger and keep its market share below 30%, Comcast forged a complex deal with Charter Communications in April.

On October 9, 2014, Time Warner announced that its shareholders had approved the merger with Comcast, with more than 99% of votes cast in favor of the deal.

On February 24, 2015, Comcast said that it was optimistic about completing the $45 billion deal to buy TWC by early 2015.

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Comcast and TWC merger unfavorable to consumers and competition

According to analysts, the merger of CMCSA and TWC will negatively impact consumers. It might result in higher prices, less innovation, and lower quality for customers. The merger will create a firm that will own over 40% of broadband customers. That would impact competitors like Netflix (NFLX), Hulu, and Amazon Prime, a subsidiary of Amazon (AMZN), because the merger will allow the entity to protect itself from market competition.

TWC announces 4Q14 results, misses estimates

In February 2015, TWC announced its 4Q14 results and reported revenues of $5.79 billion, an increase of 3.8% when compared to revenues from 4Q13. Full-year revenues also increased 3.1%, up from $22.12 billion in 2013 to $22.81 billion in 2014.

Net income for 4Q14 was $554 million, or $1.96 per basic common share and $1.95 per diluted common share. In comparison, net income was $540 million, or $1.92 per basic common share and $1.89 per diluted common share, in the same quarter a year ago. Full-year 2014 net income attributable to TWC shareholders was $2 billion, or $7.21 per basic common share and $7.17 per diluted common share. This was $2 billion, or $6.76 per basic common share and $6.70 per diluted common share, the previous year.

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