Time Warner Cable Inc. ATWC

Like most cable companies, TWC possesses a great network capable of offering TV, high-speed Internet access, and fixed-line phone service. No competitor can match the firm's capabilities in most of the markets it serves.

Comcast hopes that the combination of content creation and distribution it will gain via the acquisition of NBC Universal will allow it to create new services for consumers while protecting the current pay-television business model. As Comcast's peer--but not its competitor--TWC may benefit from this deal without the hassle of making an acquisition.

As one of the three largest pay-TV operators in the nation, TWC has substantial leverage when negotiating pricing with content suppliers.

TWC's networks reach thousands of businesses. Providing services to these customers represents a great growth opportunity. The firm estimates small- and medium-sized businesses in its territory spend $10 billion annually on telecom services, and that its current share is less than 10%. Read more 

TWC will struggle to grow and maintain margins over the next couple years. The phone companies are skimming off television customers, the Internet access business is maturing, and fixed-line phone service is a declining business. Internet-based video and wireless services threaten to further hamper growth.

Around one fourth of the homes TWC serves are in Los Angeles and Dallas, markets the firm acquired in 2006. Customer penetration in these cities is likely still well below the rest of the firm's territory, making them targets for competitors. Another 10% of TWC's customers are in New York City, a market crucial to Verizon.

Wireless is a major hole in TWC's service capabilities. The firm holds a stake in Clearwire CLWR, which is deploying WiMax-based wireless networks, and it has agreements with Clearwire and Sprint S to resell wireless services, but these types of relationships have historically been a poor substitute for outright network ownership. Read more