Cox Considers Buying Business Services to Step Up AT&T Challenge

Cox Communications Inc. is considering acquisitions of business-services companies with annual revenue of about $200 million and could announce a deal in the next six months.

The third-largest U.S. cable company is targeting telecommunications-services and cloud-computing companies as it seeks to increase its potential revenue base by 10 percent in 2013, Phil Meeks, senior vice president of Cox Business, said in an interview. Atlanta-based Cox is also looking at partnerships and acquisitions of smaller companies, he said.

U.S. cable companies are counting on faster-growing business services to buoy growth as residential video customers decrease. While closely held Cox doesn’t release figures, the company has taken market share from AT&T Inc. (T), Verizon Communications Inc. (VZ) and CenturyLink Inc. (CTL), its three largest competitors, providing small businesses with Internet, TV and phone services, Meeks said.

Cox is complementing its voice and high-speed Internet service by offering information-technology support and services. Buying a company that specializes in cloud-computing services would give Cox a broader array of ways to make money from businesses with fewer than 20 employees, Meeks said. With cloud computing, companies pay to store their data and applications in remote locations.

Cox’s cable rivals are making deals as well. Time Warner Cable Inc. (TWC), the second-largest U.S. cable company, purchased NaviSite Inc., a company that manages and stores data for businesses, for $274 million in April 2011. Comcast Corp. is the nation’s biggest cable provider.

Cox’s business-services revenue is expected to grow about 13 percent to $1.4 billion in 2012 and is on pace to reach its $2 billion sales target by 2016, Meeks said. Sixty-five percent of Cox Business’s revenue comes from businesses with 19 employees or fewer, he said. Cox’s total annual sales are $9 billion a year, he said.

Cox sold $1.5 billion of bonds earlier this week in its first debt offering since 2009. Proceeds from the sale may be used to fund a dividend, repay debt or for general corporate purposes, a person familiar with the offering said this week.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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