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Merger Pressure Mounts for Time Warner

The pressure's on at Time Warner Cable.

The Wall Street Journal reports that a shareholder fight may be on the agenda in early 2014 if Time Warner Cable Inc. (NYSE: TWC) doesn't consider a deal to merge with Charter Communications Inc. Charter has been courting Time Warner since John Malone's Liberty Global Inc. (Nasdaq: LBTY) took a 27 percent stake in Charter, the nation's fourth largest cable company, earlier this year. However, Time Warner has rebuffed advances from both Liberty and Charter executives.

Separately, Reuters has reported that Time Warner may be interested in a deal with Cox Communications Inc. or Cablevision Systems Corp. (NYSE: CVC), but no definitive details have emerged around either possibility.

According to the WSJ, an investor uprising at Time Warner could occur if no merger deal gets done shortly after Robert Marcus takes the helm as Chief Executive Officer. Glenn Britt is scheduled to step down from the position at the end of this year.

Keith Meister, head of the hedge fund Corvex Management LP, is seen as the likely rebel leader in a potential proxy war. Meister reportedly follows in the footsteps of mentor Carl Icahn, the legendary billionaire who has a made living out of stirring up shareholders attached to companies in his investment portfolio.

The theory is that the cable company needs to grow by merger or acquisition in order to compete in the increasingly cutthroat pay-TV environment. Consolidation would theoretically give Time Warner more leverage in licensing negotiations, extended reach with its broadband network, and increased buying power in the cable vendor market. (See: Behind Cable's Urge to Merge.)

While Time Warner reported an increase in revenues at the end of the last quarter, it also lost 93,000 residential customers. Rate increases are part of what kept Time Warner's financials up even as video subscriber numbers fell below the 12 million customer mark. (See: Broadband Saves TWC's Sales.)

— Mari Silbey, Special to Light Reading Cable

msilbey 10/3/2013 | 9:13:26 PM
Re: TWC merger Love this idea, but I'm not at all convinced it's something TW would do. Not in their DNA.

Maybe Cox? I have zero basis for such speculation, but at a gut level I see Cox as more likely to go the infrastructure route than Time Warner. 
DOShea 10/3/2013 | 9:50:48 AM
Re: TWC merger That's a really interesting idea, though Level 3 supposedly has sworn off mergers and acquisitions for a while as they try to make the most of what they've got.
Voodookungfu 10/3/2013 | 12:55:39 AM
TWC merger TWC needs to think about the future instead of the past. If they are going to merge or buy it should be with level3. A merger like this would make them the only cable company with a national back bone, thus pushing the other cable companies to move upmarket with their business services by utilizing their backbone. It also gives them the products they desperately need such as VoIP, collocation and cloud service. Not to mention they would pull millions of dollars from the ilec's who level 3 is currently using to service their last mile, all those end users would/could end up on the mso's last mile and in turn they would receive customers back. The first cable company with a national backbone is going to be the winner, not the company who can save the most on programming. Anyone who has been paying attention to the industry in the last 5 years can see that.
brookseven 10/2/2013 | 8:13:17 PM
Re: Larger means less service Phil,

 

How many fewer cable companies will serve your area?

 

That is the only question that the DoJ will ask.

 

seven

 
Phil_Britt 10/2/2013 | 5:29:29 PM
Larger means less service I'm not in the area served by Time Warner, but the larger any of these companies gets, the more the customer is a nuisance. I had one of the nation's other large cable providers for one year (length of a low-priced deal) and quickly switched back to a regional competitor when the deal was up.

If DoJ doesn't try to stop any such merger, it should. Satellite and OTT might offer options for some, but not for enough subscribers who would likely be stuck if any such merger was to go through.
MordyK 10/2/2013 | 4:44:36 PM
Re: Anti-trust implications? I'm not sure what real difference these cable mergers will have on pricing, as they are all already pretty much monopolies in their home markets. To me this is simply about bulking up and getting the financial benefit of a converged network
brookseven 10/2/2013 | 1:01:28 PM
Re: Anti-trust implications? Duh!,

Not sure that will be a problem.  When I have dealt with the DoJ on those issues, their questions were around who will have fewer competitors for the products and services.

Since Cable Companies, in general, do not have overlapping customer bases that this is not an issue.

The FCC might be different but I see the people impacted as suppliers not customers.

seven

 
Duh! 10/2/2013 | 10:59:47 AM
Anti-trust implications? And of course the FCC and DoJ are going to have no problems with further consolidation in the Cable industry.  Really?
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