AOL Restructures Newhouse Cable Deal
AOL Time Warner Inc. agreed to hand over management of cable systems serving 2.1 million subscribers to Advance/Newhouse Communications and take control of the money-losing Roadrunner Internet service after the Newhouse family sought a restructuring of their partnership.
The shift will reduce Time Warner Cable customers by 16% to 10.8 million. If the change was made last year, sales would have been lowered by $1.25 billion, or 3.3%, and cash flow would have been cut by $570 million, or 5.8%, the cable operator said.
AOL may have been forced to pay about $8 billion to keep the 2.1 million customers on its rolls if the company was unable to reach an agreement with Advance/Newhouse, analysts have said.
Under the new pact, Newhouse later this year will assume control of systems in Florida, Alabama, Indiana, Detroit and in Bakersfield from AOL’s Time Warner Cable. Time Warner Cable will continue to provide certain services, including programming, to all cable systems within the partnership.
The original pact was formed in 1995 to pool resources to create stronger cable clusters.
Shares of AOL Time Warner closed up 44 cents at $15.50 on the Big Board before the news was released.
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