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New Charter: Different from the Comcast and Time Warner Cable Deal

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Comcast’s different business model

Earlier in this series, we learned about the proposed merger of Charter (CHTR), Time Warner Cable (TWC), and Bright House. The merger was announced on May 26, 2015. We also learned that the proposed merged company—New Charter—will have a significant scale in cable operations in the US.

It may become the third largest US pay-TV provider if the AT&T (T) and DIRECTV (DTV) transaction is approved. It will become the second largest Internet provider in the US when the New Charter merger is completed. In this part of the series, we’ll look at how the New Charter deal could be different from the failed Comcast (CMCSA) and Time Warner Cable deal.

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The Comcast-Time Warner deal failed after the deal faced regulatory issues. Regulators including the FCC (Federal Communications Commission) review merger deals to gauge the possible impact on competition and consumer interest in the media and telecom industries. However, Comcast’s business model is different from Time Warner Cable and Charter.

Apart from being the largest US cable company, Comcast owns NBCUniversal, which in turn owns media networks and the NBC broadcasting network. Time Warner Cable and Charter are core cable companies. So, New Charter doesn’t present a threat to consumer interest or competition from vertical integration of content producers and distributors in the media value chain.

New Charter won’t be the largest player in cable segments

As we discussed earlier in this series, after the completion of the mergers of the three companies in New Charter, it won’t be the dominant player in the segments where these companies operate.

New Charter won’t become the largest Internet provider or the biggest pay-TV provider in the US. New Charter won’t even become the biggest cable operator in the US. Comcast and Time Warner Cable are the two largest cable providers in the US. Comcast is also the largest pay-TV and Internet provider in the US.

You could consider investing in the iShares Core S&P 500 ETF (IVV). IVV held ~0.2% in Time Warner Cable on April 30, 2015.

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