* Time Warner Cable, Cox talk California swap - sources
* Cable systems valued at $2 bln - source
* Time Warner, Cox also broached broader alliance - source
* Talks now on hold, expected to resume - sources
(Adds details on cable systems, Cox ownership)
By Yinka Adegoke and Soyoung Kim
NEW YORK, Sept 13 Time Warner Cable Inc TWC.N
and privately-held Cox Communications have held early talks to
swap cable systems in California and also broached the idea of
a broader alliance, according to two people familiar with the
The cable systems were valued around $2 billion, according
to one of the people. After several months of discussions the
talks slowed down in August, but they could return to the
negotiating table in the near future, both people said.
The early-stage talks between Time Warner Cable and Cox,
the second and third largest U.S. cable operators, were aimed
at competing better against larger rival Comcast Corp
(CMCSA.O), which is buying NBC Universal from General Electric
(GE.N), the sources said.
Time Warner Cable and Cox both declined to comment.
Both firms have various adjacent cable systems in southern
California cities like Los Angeles and San Diego.
Cable companies typically prefer to build or acquire cable
systems with access to homes in adjacent neighborhoods to
systems they already own to help lower operating costs such as
There has long been an expectation in Wall Street circles
that Time Warner Cable, which was spun off from Time Warner Inc
(TWX.N) in March 2009, would eventually seek to expand by
acquiring cable systems close to systems it already owns.
There has also been a longer-term view that Time Warner
Cable would be interested in owning systems which Cox currently
holds if the Cox family decides to exit the cable business. The
Cox family through its holding company Cox Enterprises also
owns media assets like TV and radio stations, websites like
AutoTrader.com and newspapers including The Atlanta
Lead parties in the discussions between the two companies
over the cable system at one time raised the possibility of a
broader alliance beyond a cable swap, said one of the people
familiar with the talks.
Once publicly traded, Cox was taken private by Cox
Enterprises in 2004 at a value of around $6.6 billion.
Cable companies typically seek to expand to reduce the
impact of programming costs on their bottom line. The more
customers a cable or satellite operator has the better leverage
they have to reduce programming fees in negotiations with cable
networks and broadcasters.
In the last year Time Warner Cable, despite having more
than 13 million customers, has found itself at loggerheads with
cable and broadcast network owners like Walt Disney Co (DIS.N)
and News Corp (NWSA.O).
Even if Time Warner Cable and Cox were to eventually
combine, they would have a total of just under 20 million
subscribers, still less than the market leader Comcast Corp
(CMCSA.O), which has over 23.2 million subscribers but more
than satellite TV operator DirecTV Group DTV.O which has over
18 million U.S. subscribers.
(Reporting by Yinka Adegoke and Soyoung Kim; Editing by