Light Reading
After getting trumped by Comcast in its pursuit of TW Cable, Charter must go back to the drawing board if it still wants to boost its size significantly.

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
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.
Seven new cable products take the stage this year, covering a wide range of the technology spectrum.
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Interviews
From 4G to 5G: Alcatel-Lucent's Dave Geary

11|25|14   |   09:09   |   (1) comment


Dave Geary, President of Wireless at Alcatel-Lucent, talks about the evolution of the 4G market, small cells, partnerships, 5G and the IoT.
LRTV Huawei Video Resource Center
Building a Secure Telefonica Network With Huawei's High-End Firewall

11|24|14   |   4:37   |   (0) comments


Andrew Davies, IP architect of the Telefonica, a leading digital communications company, discusses the Huawei security gateway solution and putting the solution into the testbed.
LRTV Huawei Video Resource Center
Huawei Partners with Spirent to Verify CE12816's 10GE Port & TRILL Networking Capabilities

11|24|14   |   2:50   |   (0) comments


Spirent Communications is the world's leading supplier for telecom testing appliances and solutions. Spirent has been in a close partnership with Huawei for a long time.
LRTV Huawei Video Resource Center
Saudi Airlines & Its ICT Transformation

11|24|14   |   2:07   |   (0) comments


In this video, Saudi Airlines discusses its network problems and how Huawei's Agile Network is its all-in-one solution.
LRTV Huawei Video Resource Center
Huawei's Agile Switch Benefiting Saudi Arabia's Yamamah Hospital

11|24|14   |   2:40   |   (0) comments


Saudi Arabia's Yamamah Hospital speaks about how Huawei's Agile Switch has improved the medical service's network infrastructure.
LRTV Huawei Video Resource Center
FanPlay & Huawei Build a Wireless Agile Smart Stadium

11|24|14   |   2:13   |   (0) comments


FanPlay is a cloud-based white label service, which is effectively a football fan engagement platform underpinned by mobile payment technology.
LRTV Huawei Video Resource Center
Building an Agile Stadium

11|24|14   |   3:54   |   (0) comments


Stadiums may be thousands of tons of concrete and steel, but they now need to be agile. Being at the stadium may not be as alluring as it once was. Sports franchises and stadium operators discuss how to get fans back.
LRTV Huawei Video Resource Center
Huawei Helps ChinaCache Tackle Challenges in the Internet Industry

11|24|14   |   3:09   |   (0) comments


ChinaCache is China's largest content distribution network supplier. Huawei's CE12800 has provided ChinaCache with very strong support in its establishment of an infrastructure network.
LRTV Huawei Video Resource Center
Cefinity on Managed Security Services & Next-Generation Firewall

11|24|14   |   7:05   |   (0) comments


Cefinity is a cloud management service provider in Southeast Asia. Ivan Zhang, CEO of the company, discusses the implementation of security service management in the cloud era.
LRTV Huawei Video Resource Center
Huawei's Agile Gateway in the Eyes of Cefinity

11|24|14   |   2:11   |   (0) comments


Cefinity is a managed service provider for enterprise networks. The company currently uses Huawei's AR series routers for the most complete range of functions. CEO Ivan Zhang speaks about the advantages of the AR series routers.
LRTV Huawei Video Resource Center
CTO of Bus-Online Talks About Huawei's Agile Gateway

11|24|14   |   2:53   |   (0) comments


Bus-Online covers around 100 million users everyday. In addition to providing mobile TV, and advertising services to the public, Bus-Online has also entered the field of mobile Internet.
LRTV Huawei Video Resource Center
Amsterdam ArenA as an Agile Campus

11|24|14   |   3:31   |   (0) comments


The Amsterdam ArenA, home of the Ajax soccer team, can be a crowded space. ArenA has partnered with Huawei to work on bringing ample bandwidth to 53,000 people at the same time.
Upcoming Live Events
December 2, 2014, New York City
December 3, 2014, New York City
December 8-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
April 14, 2015, New York City, NY
May 6, 2015, McCormick Convention Center, Chicago, IL
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
Irish Telecom outlines the rise of VoIP technology, including its adoption within businesses and their perception of its quality.
Hot Topics
Bell Labs Chief Slams 'Toy' Networks
Robert Clark, 11/19/2014
$38.3M: Ain't That a Kik in the SMS
Sarah Reedy, Senior Editor, 11/20/2014
Do You Have a 2020 Vision?
Dennis Mendyk, Vice President of Research, Heavy Reading, 11/21/2014
Operators Should Block Ads to Get Their Cut, Startup Says
Sarah Reedy, Senior Editor, 11/24/2014
$35B+ Spectrum Auction Dings Verizon, Shines Dish
Dan Jones, Mobile Editor, 11/24/2014
Like Us on Facebook
Twitter Feed