Cable consolidation hype is definitely rising as the end of the year approaches. Led by the Wall Street Journal, several media outlets are now reporting that the vultures are circling Time Warner Cable Inc. (NYSE: TWC) as they smell blood.
CNBC first reported Friday that Comcast Corp. (Nasdaq: CMCSA, CMCSK) has joined Charter Communications Inc. in the hunt to take over Time Warner Cable, the second-biggest US MSO after Comcast. Bloomberg then added to the story with news that Comcast and Charter are considering a joint bid to acquire TW Cable, with each company likely to take on the customers that best align with its existing footprint.
According to both CNBC and Bloomberg, TWC appears to be more interested in a deal with Comcast than an acquisition by Charter as proposed by Liberty Global Inc. (Nasdaq: LBTY) Chairman John Malone. Bloomberg cited a "person with direct knowledge of the matter" as saying that incoming Time Warner Cable CEO Rob Marcus would prefer to work alongside Comcast CEO Brian Roberts than alongside Malone.
TWC had a dismal earnings report in the latest quarter, losing well over 100,000 customers in total, including 306,000 basic video subscribers, and thereby fueling the new wave of takeover speculation. The Wall Street Journal reported in October that an investor uprising is likely at the company if no merger or acquisition deal is done shortly after Marcus takes over the CEO reins at the start of 2014. (See TW Cable Hemorrhages Subs and Merger Pressure Mounts for Time Warner.)
The cable industry as a whole is under consolidation pressure as competition mounts for new video and broadband subscribers. Programming costs are a major concern as video providers increasingly see their profit margins squeezed by higher content licensing fees.
In related news, both AT&T and Comcast are reportedly planning to hike fees in the near future with a broadcast TV surcharge. The additional surcharge won't show up in the initial price on customers' monthly bills, but will appear further down on the bills.
— Mari Silbey, special to Light Reading Cable