The Charter, Bright House, Time Warner Cable merger
During Charter Communications’ (CHTR) recent 1Q16 earnings call, Tom Rutledge, the company’s CEO (chief executive officer) and president, highlighted the progress of the Charter, Bright House, Time Warner Cable (TWC) merger. He mentioned when the company might complete the transaction once regulatory approvals are in place. According to Rutledge, “We expect to the CPUC to vote on the judge’s recommendation on May 12. All other states have approved our transactions.”
Rutledge added, “We’re also pleased that the FCC chairman has circulated an order approving our transactions and that the DOJ has filed a proposed judgment with the District Court under which our proposed transactions may proceed. Assuming we received FCC approval, we would expect to officially close our transactions within just a few days of receiving approval from the California PUC.”
Details of the merger
According to the merger agreement, which was signed in May 2015, the combined pro forma results of Charter, Time Warner Cable, and Bright House would have generated revenue of ~$37.4 billion in 2015.
According to the company and based on certain assumptions, adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of the combined entity would have been ~$13.2 billion in 2015.
Overall, the combined customer relationships of the companies in the merger would be ~$25.1 million at the end of 4Q15, according to Charter. The combined penetration levels for Internet, video, and voice services of these companies were 44%, 36%, and 23%, respectively, at the end of 4Q15.
For a diversified exposure to some of the biggest cable companies in the United States, you may consider investing in the SPDR S&P 500 ETF (SPY). The ETF held a total of ~1.2% in Comcast (CMCSA), Time Warner Cable, and Cablevision (CVC) at the end of March 2016.
In the next part of the series, we’ll see why Charter’s core operating profitability improved in 1Q16.