Time Warner, Comcast Iron Out Some Wrinkles - TheStreet

Time Warner (TWX) and Comcast (CMCSA) - Get Report set a deal Monday to restructure their joint ownership of cable TV systems serving 1.5 million subscribers.

Though the agreement can be seen as part of both cable giants' efforts to simplify their respective capital structures and keep their debt under control, the deal calls for Time Warner and Comcast to continue their joint ownership of the systems through at least mid-2006.

The deal "essentially" keeps the current partnerships in place for at least two years, the companies said in a statement, "and provides for a simple dissolution of the partnerships in the future."

Time Warner's shares rose 23 cents Monday to trade at $16.51, while Comcast's fell 28 cents to $31.32.

At issue are two 50/50 joint ventures operated by Time Warner Cable: Texas Cable Partners, which serves about 1.2 million subscribers in Houston and other south Texas communities, and Kansas City Cable Partners, which has about 300,000 subscribers in Kansas City, Mo.

Under the terms of the deal, the two partnerships will be merged into one, which Time Warner will continue to manage.

After the later of June 1, 2006, or the two-year anniversary of the merger, either Time Warner or Comcast will be able to trigger the split of the combined partnership. The nontriggering party will then have the right to take full ownership of its choice of one part of the partnership -- either the Houston system, or the non-Houston Texas systems plus the Kansas City system.

Under the previous agreements governing the joint ventures, either party had the option to initiate a buy/sell process with the partnerships, as of Aug. 31 for Kansas City and starting on Dec. 31 for Texas. Under those provisions, the noninitiating company then had the right either to buy out the other party or sell its stake to the other party, with the price based on the market value of the partnership. Either party could have dissolved either joint venture starting in 2005.

On Time Warner's third-quarter conference call, CEO Dick Parsons said it was a top priority for the company to "rationalize" its joint ventures with Comcast. Meanwhile, Comcast has indicated it has no long-term interest in passively holding nonconsolidated assets.

Comcast, the nation's largest operator of cable systems, separately owns 21% of Time Warner Cable, the Time Warner subsidiary that is the nation's second-largest operator. Comcast has that stake thanks to its acquisition of

AT&T's

(T) - Get Report

cable systems last year, which included a piece of Time Warner's Time Warner Entertainment subsidiary. When Time Warner dissolved TWE earlier this year in a previous effort to simplify its capital structure, Comcast received its stake in Time Warner Cable as part of the deal.