Light Reading

What's Next for Charter?

Alan Breznick
2/14/2014
50%
50%

Like a fallen Olympic skier, Charter CEO Tom Rutledge now knows all about the agony of defeat.

Just two days after triumphantly unveiling Charter Communications Inc. 's impressive slate of 13 independent nominees for the Time Warner Cable Inc. (NYSE: TWC) board of directors, Rutledge saw his dreams of a cable dynasty go up in smoke Thursday morning when Comcast Corp. (Nasdaq: CMCSA, CMCSK) swept in with a far more attractive $45.2 billion offer for TW Cable. With the deal immediately accepted by TW's relieved and grateful management team, Rutledge's months-long quest has suddenly come to a screeching halt just when he was sensing the thrill of victory. (See Comcast Strikes $45B Deal for TWC.)

Bowing to the inevitable, Charter quickly acknowledged that sobering reality with a brief written statement Thursday. In the statement, the company sought to make the hard-to-believe case that it's really better off without TWC after all.

"Charter has always maintained that our greatest opportunity to create value for our subscribers is by executing our current business plan, and that we will continue to be disciplined in this and any other M&A activity we pursue," the statement said. Company officials declined to say more.

To be fair, Rutledge has made that argument before. On a conference call with financial analysts and press last month, he insisted that Charter would simply re-focus on its own operations and set its sights elsewhere if its hostile takeover of TW Cable failed.

But investors didn't buy that story on Thursday. Charter's stock price, which started the day at $137.57 per share, sank more than 6% to $128.91 by the end of the day after falling as much as 9% in early-morning trading following the announcement of the Comcast-TWC deal.

It probably didn't help matters any that Time Warner Cable CEO Rob Marcus, understandably savoring his company's successful rebuff of Charter, publicly dissed Charter's stock in a conference call Thursday morning. When asked by analysts why TWC would accept an all-stock offer from Comcast when it had been insisting on largely cash from Charter, Marcus replied that comparing the stock of Comcast and Charter was like comparing "apples and oranges."

And it must have hurt Rutledge and his management team even more to know that Comcast might never have made its bid for TWC if Charter hadn't started peddling some of TWC's prime systems to Comcast. In a recent gambit to raise cash and make a deal more appealing to TWC management, Charter reportedly offered to sell TWC's New York City, New England, and North Carolina cable clusters to Comcast if its takeover attempt succeeded. Intrigued by the idea, Comcast apparently began discussing the systems with TWC and the discussions quickly escalated from there. Talk about unintended consequences. (See Comcast May Join Charter Team.)

So now that Charter has lost out to Comcast for the big TWC prize, what does the fourth-largest US MSO do now to boost its size and play with the big boys? Well, it could try to buy some or all of the cable systems with 3 million subscribers that the combined Comcast-TWC plans to sell to cap its size at 30 million video customers. Comcast chairman and CEO Brian Roberts made it clear Thursday that he's open to selling those homes to anybody, including the company that he outmaneuvered.

But those systems, which have not been identified yet, will likely be scattered throughout the US and probably not give Charter the major metro markets and influence that it wants. Comcast, which prides itself on operating in 20 of the top 25 US markets, isn't likely to sell off a Dallas, Houston, Seattle, or Miami cable system cluster to Charter or anybody else. More likely, Comcast will try to sell off smaller systems in less concentrated areas, the same type that Charter predominantly has.

Nor do there appear to be many other places for Charter to turn for a big, quick spike in growth in the increasingly consolidated US cable market. So, unless Rutledge and his team can somehow convince a Cox Communications Inc. , Cablevision Systems Corp. (NYSE: CVC), or Bright House Networks to sell out, Charter may still be champing at the bit for some time to come.

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

(5)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/18/2014 | 9:42:31 PM
Re: Bright House
I agree. I think the Charter team still needs a couple more years to really prove themselves and show that they, and not Neil Smit and his former Charter crew, are the ones turned Charter around. Charter's Q4 earnings call is this Friday morning. Should be fun.  
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/14/2014 | 7:27:01 PM
Re: Bright House
BECAUSE JOHN MALONE WILLS IT! :)

I agree, they have no reasonable reason to sell. John Malone gets what he wants, though. Or he used to, anyway. These days he demands things and then something else entirely happens, as evident by this week's news. 

I wouldn't sell to Charter personally. And I think they have a pretty fresh executive team that needs to prove they know how to turn things around before Wall Street gets even remotely bullish on the idea of them taking on more.
spc_isdnip
50%
50%
spc_isdnip,
User Rank: Lightning
2/14/2014 | 5:40:35 PM
Re: Bright House
Bright House and Cox are both privately owned, I think both by families, so they have no particular reason to sell out.  They are both well run, in much better shape than Charter, and profitable, so why even entertain a deal from the schlockmeister Malone?
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
2/14/2014 | 3:39:27 PM
Why bother
Is there a point to accumulating a bunch of mediocre properties to go along with the less-than-stellar stuff you already have? We're not better, just ... bigger.
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/14/2014 | 8:47:40 AM
Bright House
Does Bright House make geographic sense for Charter? I'd need to look at a map again and remind myself if Charter has any Southern connecting markets.

Cox hasn't seemed to warm to the idea of an acquisition in recent months, and Cablevision in NY would likely be unlikely if it was already rumored Charter wanted to sell off NYC To Comcast if their deal had gone through, yeah?
More Blogs from Breznick Unbound
The heads of AT&T, Verizon and Time Warner Cable all warn that the imposition of a common carrier regulatory regime could chill US broadband investment.
As expected, US cable broadband subscribers pass cable video subs for the first time in latest report from Leichtman Research Group.
While the No. 2 US MSO is accelerating plans for all-digital video and broadband speed upgrades, it's still desperately playing catch-up.
In yet another attempt to conquer the TV set, Google is launching its Android TV operating system for the big video screen. But will it succeed where other attempts have failed?
In the latest edition of its Visual Networking Index (VNI) study, Cisco forecasts that HD and Ultra HD video will account for nearly two-thirds of all IP video traffic by 2018.
Flash Poll
From The Founder
The New IP is actually bigger even than business. Like another hugely important tech that Light Reading is digging into right now, the New IP has the potential to change the world by fundamentally advancing what it is possible for people to achieve with communications.
Que Sera Sarah
Growth of the 5G Ecosystem

3|6|15   |   1:15   |   (1) comment


Use cases and industry collaborations dominated 5G discussions during Mobile World Congress 2015. For what the road to 5G means for operators and their partners, head to the Building America's 5G Ecosystem event in New York on April 14.
LRTV Custom TV
Sonus NaaS IQ Real-Time Demo

3|6|15   |   4:03   |   (0) comments


Compass Networks Chairman and CEO Matt Bross and Ray Dolin, CEO of Sonus Networks, demonstrate their Sonus IQ SDN solution using a live video conference connection.
LRTV Custom TV
LRTV Talks Carrier WiFi & WiFi Calling With Aptilo Networks

3|6|15   |   4:53   |   (0) comments


We stopped by Aptilo Networks, a market leader in WiFi service management and offloading, to discuss the new possibilities with next-generation WiFi calling and why WiFi should be a natural part of any operator strategy.
LRTV Interviews
NGMN Chairman Outlines His 5G Vision

3|6|15   |   5:10   |   (1) comment


Bruno Jacobfeuerborn, chairman of the NGMN Alliance and Deutsche Telekom CTO, shares his thoughts on the challenges, opportunities and costs of 5G.
LRTV Interviews
In the Cloud With Telecom Italia

3|5|15   |   7:10   |   (0) comments


Light Reading CEO Steve Saunders sits down with Telecom Italia's Simone Battiferri at Mobile World Congress to discuss virtualization, agility and the economic advantages of the cloud.
LRTV Huawei Video Resource Center
New Ways of Working

3|5|15   |   4:24   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Hong Kong Telecom's Michael Yue explains how the transformation in its business has changed its customer relationships.
LRTV Huawei Video Resource Center
Bridging the Digital Gap

3|5|15   |   4:03   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Boingo's Dr. Derek Peterson explains how ICT can help telcos bring the physical and virtual worlds closer together.
LRTV Huawei Video Resource Center
Making the Internet of Things Affordable

3|5|15   |   2:42   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Telefonica's Dr. Mike Short explains how the Internet of Things demands a new low-cost approach to connectivity from telcos.
LRTV Huawei Video Resource Center
Evolution, Not Revolution

3|5|15   |   2:00   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Heavy Reading's Patrick Donegan explains why telcos can't be too hasty in their efforts to transform themselves.
LRTV Custom TV
Management & Orchestration Enablement Strategies Required for NFV Commercial Success

3|5|15   |   6:22   |   (0) comments


NFV commercial success rests on successful service orchestration strategies which can span heterogeneous physical, virtual, legacy and next-gen networks. Network data and security integrity are additional key aspects. Nakina provides a suite of orchestratable network integrity applications built on an open, scalable MANO enablement platform.
LRTV Huawei Video Resource Center
The Power of Five Convergences in OceanStor OS

3|4|15   |   6:24   |   (0) comments


OceanStor OS is Huawei's brand-new storage operating system. While inheriting the consistent high stability, reliability and performance from the company's previous storage products, OceanStor OS abounds in new converged storage features. Specifically, the new storage operating system achieves "five convergences" to lift storage convergence to a higher level.
LRTV Huawei Video Resource Center
4K Brings Extreme Video Experience

3|4|15   |   8:10   |   (0) comments


4K video is a hot topic in the video industry. It will certainly bring an extreme video experience to end users. At the same time, however, it will also pose a big challenge to operators. Check out this Huawei 4K experts' discussion about how operators can achieve success in 4K video service.
Upcoming Live Events
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
All Upcoming Live Events
Infographics
Net neutrality, broadband services and the current outlook on data consumption, as presented by the New Jersey Institute of Technology.
Hot Topics
Internet Pioneers Decry Title II Rules
Carol Wilson, Editor-at-large, 3/2/2015
Wheeler: We'll Enforce Title II 'Case-By-Case'
Sarah Thomas, Editorial Operations Director, 3/3/2015
New CenturyLink CTO in Major Overhaul
Carol Wilson, Editor-at-large, 3/4/2015
Alibaba 'Planting a Flag' in US Cloud Market
Mitch Wagner, West Coast Bureau Chief, Light Reading, 3/4/2015
Few in Number, Big in Data
Sarah Thomas, Editorial Operations Director, 3/2/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Chattanooga’s EPB publicly owned utility comms company has become a poster child for how to enable a local economy using next-gen networking technology. Steve Saunders, Founder of Light Reading, sits down with Harold DePriest, president and CEO of EPB, to learn how EPB is bringing big time tech to small town America.
Light Reading CEO Steve Saunders talks transformation and virtualization – including Light Reading's independent testing of the vendor's virtualization solutions – with Cisco CEO John Chambers at Mobile World Congress in Barcelona.
Check out Light Reading's interview with Jay Samit, the newly appointed CEO of publicly traded SeaChange International Inc. With a resume that includes Sony, EMI, and Universal, Samit brings a reputation as an entrepreneur and a disruptor to his new role at the video solutions company. Hear what he had to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.
G'day! And welcome to an entirely new feature on Light Reading -- our weekly "CEO-to-CEO" interview.