Merger Updates: Acquisition of TWC by Charter Communications
Review of Charter–TWC merger
On June 23, 2015, the FCC (Federal Communications Commission) announced that it had started its review of the proposed merger of Time Warner Cable (TWC) with Charter (CHTR), valued at $78.7 billion. The FCC will also review the $10.4 billion acquisition of Bright House. The proposed parent company of the Charter, Time Warner Cable, and Bright House merger will be called New Charter.
According to the merger press release, the combined entity, New Charter, will have 24 million customers in 41 states. Together, the three cable companies will cover nine DMAs (designated market areas) in the top 25 DMAs.
As the chart above indicates, New Charter would serve 19.4 million broadband customers. This would create the nation’s second-biggest cable operator behind Comcast (CMCSA).
New Charter has proposed base speed tiers of a minimum of 60 Mbps or 100 Mbps in Time Warner Cable and Bright House Networks’ territories. This is the same as Charter’s current standard minimum base speed tier.
Pay-TV business
New Charter would serve 17.3 million video customers and would be the third largest video distributor behind AT&T (T)–DIRECTV (DTV) and Comcast, assuming the AT&T–DIRECTV merger is approved. The proposed New Charter’s large video subscriber base should help the company while it negotiates with media companies for content costs, which is a significant expense for cable companies.
In a June 25, 2015, filing with the FCC, Charter claimed that New Charter would be more interested in expanding its broadband services, rather than in the pay-TV business. This disclosure is significant in light of the FCC’s opposition to the Comcast–Time Warner deal. The FCC had opposed the Comcast–Time Warner deal due to anti-trust issues.
You can dive deeper into the merger in Time Warner Cable: A Media Giant and Analyzing the Charter, Time Warner Cable, and Bright House Merger. Investors can get a diversified exposure to Time Warner Cable with the Consumer Discretionary Select SPDR ETF (XLY), which holds 2.13% in the company.
