Meet the New Charter

Mari Silbey
News Analysis
Mari Silbey, Senior Editor, Cable/Video
5/12/2016



The wait is almost over.

Nearly a full year after Charter Communications Inc. signed separate but related deals to acquire Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks , the company has cleared its final hurdle on the way to closing both transactions. The California Public Utilities Commission was the last regulatory body that needed to sign off on the deals, and the CPUC handed down its approval today.

Light Reading has written extensively about Charter's pursuit of TWC and Bright House over the last year. But in case you missed it or need a recap, here's a briefing sheet covering the most important aspects of the landmark mega-deal.

Acquisition costs

  • Time Warner Cable - $56 billion
  • Bright House Networks - $10.4 billion
  • Subscriber Numbers
    Source: Data derived from companies' most recent earnings reports as well as numbers listed for Bright House Networks in Charter transaction materials.
    Source: Data derived from companies' most recent earnings reports as well as numbers listed for Bright House Networks in Charter transaction materials.

    Combined Footprint
    Source: Charter transaction materials
    Source: Charter transaction materials



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    Conditions imposed by regulators

    1. For seven years, Charter may not implement usage-based pricing or data caps for broadband services.
    2. Charter must continue to provide free interconnection services. More companies will qualify for free interconnection under new Federal Communications Commission (FCC) parameters.
    3. For seven years, Charter may not mandate against or penalize programming partners for streaming content online.
    4. Charter must build out high-speed broadband services to 2 million additional homes and institute a low-income broadband program.
    5. The FCC will adopt a system for monitoring Charter's compliance with all of the transaction conditions.

    Major impacts

  • Competing Pay-TV ecosystems: Comcast Corp. (Nasdaq: CMCSA, CMCSK) has created a dominating pay-TV ecosystem with initiatives like its X1 platform and the birth of the RDK set-top software stack. A new and larger Charter will create a significant competitive force to the Comcast technology and business approach in the cable market. (See Shaw Licenses X1, Proves Comcast's Influence.)

  • A strategic roadmap reapplied: Charter CEO Tom Rutledge has repeatedly said he plans to use the same strategies that he implemented successfully with legacy Charter in the newly acquired markets. These strategies include migrating systems to all-digital video delivery and extending the rollout of Charter's cloud-based Spectrum TV guide. (See Rutledge Sets Stage for New Charter.)

  • Business services boost: Time Warner Cable will give Charter a major boost in the business services market, bringing with it significant fiber deployments and connections to commercial buildings. Combined business services revenue for Time Warner Cable and legacy Charter was $4.4 billion in 2015. (See Charter Plans Business Services, Wireless Push .)

  • WiFi everywhere: Rutledge has committed to investing "significantly in out-of-home WiFi," and the combination of Time Warner Cable and Bright House Networks should immediately add close to 100,000 hotspots to Charter's existing footprint, if not more. Charter will also gain access to hundreds of thousands of hotspots through the CableWiFi consortium, and can take advantage of the same MVNO agreement with Verizon Communications Inc. (NYSE: VZ) that Comcast has already activated. (See Analysts More Than Bullish on Comcast MVNO.)

  • Reducing costs through restructuring: The price on Charter's acquisitions can only be supported with the help of cost-cutting measures. Among them, it appears Charter will shut down several Time Warner Cable facilities in: Charlotte, N.C.; Herndon, Va.; and Syracuse, N.Y. A Bright House Networks Network Operations Center in St. Petersburg, Fla. is reportedly also on the block. (See Charter Jumps Gun on TWC Restructuring.)

    — Mari Silbey, Senior Editor, Cable/Video, Light Reading

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