Boston, MA 04/04/2014 (wallstreetpr) – Selling Internet and phone service to businesses may not immediately ring a bell when it comes to analyzing the USD 45.2 billion mega merger between Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable Inc (NYSE:TWC). Both the entities however earned approximately USD 5 billion between them and clocked 20 percent uptick in this business. Last year, Comcast earned US 3.2 billion clocking a growth rate of 26 percent rate, whereas Time Warner grew at 22 percent to rake in USD 2.3 billion.
If the merger is approved, the two companies would have the ability to cater to customers in 23 of the largest US cities including lucrative markets like New York, Los Angeles, Chicago and San Francisco.
If the deal is indeed approved by market regulators, then we could see the emergence of an entity whose footprint could match AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) in a market which is currently valued at USD 60 billion by IDC.
The hunt for possible revenues in core telecommunication products also echoes the need of sourcing newer avenues of growth for cable companies where the pie is made up of selling television related services. This revenue stream may in the near to medium term mature as is evidenced from the fact that residential cable revenue of Comcast clocked a measly 3 percent growth whereas Time Warner’s growth was only 1.2 percent.
The advantage of enterprise contracts come from not only the scale, but the relative stability they provide. Most enterprise contracts are long term and in some cases allow a lead time of six months.
Enterprise contracts also provide better margins vis a vis retail customers. For example a large hospital can provide anywhere upto USD 100,000 per month in revenues. Also, it is important to realize that it is considered more efficient in terms of time if an institutional contract is secured i.e. a greater ROI per meeting.
