Charter Moves Forward on Friendly Bid for Time Warner Cable

John Malone, Chairman of Liberty Media, the dominant shareholder of Charter Communications, reportedly called Time Warner Cable CEO Rob Marcus in recent days about a friendly merger following the collapse last week of an offer by Comcast to buy Time Warner, according to the Wall Street Journal blog. Malone and Marcus appear be discussing a 3-way merger that would challenge Comcast’s industry dominance.

Comcast (NASDAQ: CMCSA), with 22,383,000 subscribers, announced the $45 billion effort to buy Time Warner Cable (NYSE: TWC), with 10,992,000 subscribers. To avoid concerns regarding anti-trust laws, Comcast made a side deal to sell some of its operations to Charter Communications (NASDAQ: CHTR).

Charter Communications Inc. is the fourth largest cable operator in the U.S., with 4,293,000 subscribers, behind Comcast, Time Warner Cable, and Cox Communications. The company offers cable television, high-speed Internet, and telephone services. Liberty Media took a controlling interest in Charter in 2013.

But as Breitbart News reported in February, Democrat majority appointees on the Federal Communications Commission voted for a policy of Internet regulation, termed “Net Neutrality,” that is substantially similar to a prior regulatory effort thatwas  struck down on January 14, 2014 by the D.C. Federal Circuit Court of Appeals as essentially discriminatory. The policy effectively empowers FCC political appointees to dictate what content they believe is honest, equitable, and balanced.

Emboldened by the new powers, the FCC and the U.S. Department of Justice leaked that they were preparing to litigate against the Comcast merger with Time Warner.

Having made what was called a “low-ball” bid for Time Warner in the past, Charter is reported to be interested in a friendly transaction. Time Warner was the poorest performing member of the industry, with no subscriber growth since 2009. But earlier this week, Time Warner reported its first video customer growth in 20 quarters.

Because it owns NBCUniversal, Comcast has had a huge competitive advantage in the cable industry, with the rapid growth of the streaming video marketplace for in house movies, series and pay-per-view sports, like Saturday’s record breaking Mayweather-vs-Pacquiao fight.

An interesting marriage scenario for Time Warner Cable and Charter would be to merge together with Bright House Networks LLC’s 2 million cable subscribers. A three-way deal would create a subscriber base of 24 million customers, and provide the economies of scale to compete with Comcast’s 27 million subscribers.

 


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