Charter Communications on Tuesday announced a deal to acquire and merge with Time Warner Cable, and also reaffirmed its commitment to buy Bright House Networks.
The US$56 billion cash-and-stock acquisition, if regulators give it a nod, will result in a merger of Charter Communications and Time Warner Cable under a new parent company called “New Charter.”
The deal values Time Warner at $78.7 billion, or $195.71 per share. Time Warner Cable shareholders will be offered a cash election option, with which they can convert their shares into a combination of New Charter stock and cash.
Charter Communications also announced that it had amended an agreement with Advance/Newhouse Partnership, the parent of Bright House Networks, to forge a new bond, contingent on Time Warner Cable shareholders’ election of cash or stocks.
New Charter, which will deliver services under the “Spectrum” brand, will move into second place among cable operators if regulators approve the Time Warner Cable and Bright House Networks deals.
First place Comcast failed to persuade the feds to approve its bid to acquire Time Warner, but Tom Rutledge, President and CEO of Charter Communications, may have better luck in convincing them that the formation of New Charter will be good for the entire industry.
New Charter will “drive greater competition through further deployment of new competitive facilities-based WiFi networks in public places, and the expansion of the facilities footprint of optical networks to serve the large, small and medium-sized business services marketplace,” Rutledge said.
Bright House Networks believes its deal with Charter will give its customers and employees the strongest prospects for the future, said Corporate Vice President of Communications Kimberly S. Maki.
“While we do not have immediate announcements regarding changes, we will be in a strong position to deliver competitive services, invest in advanced technology, and develop innovative products that will compete with both global and national brands,” she told the E-Commerce Times.
A Fair Fight
Comcast courted Time Warner Cable at length, promising to play by the Net neutrality rules laid out by the Federal Communications Commission, and to divest a significant amount of its interests in order to receive the regulatory approval.
It was just a month ago that Comcast pulled its bid for Time Warner Cable, after the FCC signaled that it had serious concerns about the deal.
The company’s decision to end its pursuit of the merger was in the best interest of consumers, FCC Chairman Tom Wheeler said. “The proposed transaction would have created a company with the most broadband and video subscribers in the nation alongside the ownership of significant programming interests.”
Although the No. 1 U.S. cable operator failed to prove that its acquisition of Time Warner Cable would enhance competition in the market, Charter has a different story to tell.
New Charter will create a strong competitor for Comcast, noted Todd Antonelli, managing director ofBerkeley Research Group.
With both deals approved, New Charter would have a customer base of 23 million people, second only to Comcast’s 27 million subscribers.
“When you look at the facts of this combination, I think [New Charter] will emerge successfully and create a strong competitor in the market — that’s what the antitrust regulators look for,” Antonelli told the E-Commerce Times. “They look at how this would provide upgraded services in markets where they don’t currently have them — and new products that can compete with the choices we already have.”
The merger and formation of New Charter will have a “slightly positive” effect on consumers, predicted John Mazur, strategic consulting engagement manager at Tangoe.
Although broadcast TV continues to decline, TV networks remain powerful forces, he noted.
“When it comes to negotiating with networks — such as ABC, FOX, ESPN, AMC, etc. — bigger is better, as consumers are able to get better TV rates and packages,” Mazur told the E-Commerce Times.
“From an enterprise customer standpoint,” he added, “businesses will benefit from the greater cable coverage areas.”