Light Reading

Comcast May Join Charter Team

Alan Breznick
1/27/2014
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The end may be coming even sooner than expected for Time Warner Cable.

In the latest chapter of the Time Warner Cable Inc. (NYSE: TWC) saga, Bloomberg is reporting that Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. are close to striking a deal to divide TWC's cable systems between them. Naturally, the proposed agreement in principle would be contingent upon Charter succeeding in its current bid to buy out TW Cable despite the fierce resistance of TWC's board of directors and management. (See Charter's $61.3B Bid for TWC Rebuffed Again.)

As reported by Bloomberg, the deal on the table would call for Comcast to buy three TWC regional clusters -- its huge New York City cable system, sizable North Carolina properties, and assorted New England systems -- from Charter once Charter prevailed. The three asset sales would reportedly add another 3 million subscribers to the customer base of Comcast, which is already by far the largest MSO in the US with nearly 22 million subscribers.

If struck, such a deal would solidify Charter's takeover bid for TWC, whose board and management have been holding out for more than the $61.3 billion, or $132.50 per share, price in Charter's latest offer. Calling the Charter bid "grossly inadequate," TWC officials have reportedly been seeking at least $140 a share for their company. (See TW Cable Strikes Back.)

A pact between Comcast and Charter would also give Charter more leeway to boost its offer for TWC because of the cash that Charter would receive on the other end. Although it's not clear what the three TWC properties would fetch from Comcast, they could be worth as much as $16 billion, based on the price that Charter paid for the Optimum West assets of Cablevision Systems Corp. (NYSE: CVC) last year, Bloomberg said.

Further, a Comcast-Charter alliance would eliminate TWC's biggest prospective "white knights" by aligning Comcast's interests with Charter's. Some industry observers have thought that TWC officials have been holding out hopes that either Comcast or Cox Communications Inc. might come riding to their rescue at the last minute.

But the Bloomberg report notes that Comcast is taking pains not to join Charter in its actual bid for TW Cable. Instead of actively choosing sides in the takeover battle between the fourth and second largest MSOs in the nation, Comcast is apparently lining up on the sidelines, waiting to see how the game unfolds before joining the action.

All three companies declined comment on the reported deal in the works Monday afternoon.

In a note to investors late Monday, Craig Moffett, a principal in MoffettNathanson LLC, argues that a deal with Comcast could increase the attractiveness of Charter's offer to TWC shareholders by enabling Charter to boost the cash portion of its offer. Moffett also contends that Comcast's involvement could make TWC's board and management more amenable to entering into serious negotiations with Charter.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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albreznick
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albreznick,
User Rank: Blogger
1/31/2014 | 8:54:06 PM
Re: How big is too big?
Good points, Karl. Well, if they do try to buy these systems that Charter would get from TWC, maybe the feds will finally declare the tipping point. The regulators are watching to see howthis all unfolds. But, of course, they've watchede other deals unfold too and done little or nothing. Where do you think the line should be, or should have been, drawn?     
KBode
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KBode,
User Rank: Light Sabre
1/28/2014 | 9:05:29 AM
How big is too big?
Comcast is the biggest TV company, biggest landline company, third biggest phone company, is expanding into electricity markets, and that's not even mentioning their NBC assets. I'm curious just how big is too be for one company to get before the DOJ and FCC start to consider the end result might not be great for consumers? Comcast's biggest problem has been customer support quality, poor in part from many years of growing too quickly and having to integrate disparate systems. 
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