Wednesday, January 17, 2007

M&A://Will Comcast by CLECs?

The Wall Street Journal picks up cablecos' interest in the SME market. It is suggested that organic growth is coming down. I would add that buying cable assets (Cablevision, Insight, RCN) includes the risk of clashing with regulators over reaching more than 30% of US households.

My take on this:
  • Reaching the desired 20% share of the SME market will not be that easy to get at. Competing on price is the way to go, and telcos are not going to let this happen hands down.
  • No end to pricing pressure. Another lucrative market (after SMS and international roaming in the wireless segment) is under attack: business services. Prices could converge to consumer-service levels.
  • Why not expand by buying assets? Comcast could target CLECs that focus on the SME market (Cbeyond, Deltacom, NuVox, One Communications, PAETEC/US LEC, Tele-Pacific), including resellers (Granite Telecomms). It would be about their customer bases, that can be transfered to the Comcast network. Add a topping of fiber backhaul and metro assets.

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