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What’s Charter’s Post-Merger Position in the US Pay-TV Market?

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May. 24 2016, Updated 2:08 p.m. ET

US pay-TV market with new Charter Communications

Previously in this series, we learned that the merger of Charter Communications (CHTR), Time Warner Cable (TWC), and Bright House Networks was completed on May 18, 2016. We also learned that the new Charter Communications is the second largest US Internet provider based on subscriber base. In this part of the series, we’ll look at the US pay-TV space with the new Charter Communications.

Time Warner Cable and Bright House Networks bring a significant video subscriber base to the new Charter Communications. With the completion of the merger, Charter Communications has the third largest pay-TV base in the United States after AT&T (T) and Comcast (CMCSA). In July 2015, the acquisition of DIRECTV (DTV) significantly boosted AT&T’s video subscribers in the domestic market.

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Content cost benefits for Charter Communications

A large video subscriber base of the new Charter Communications should help, at least to some extent, with negotiating with media companies for content costs. The company expects to get similar programming rates that Time Warner Cable gets.

According to Chris Winfrey, Charter Communications’ chief financial officer, “On programming, yes we believe we will step into the Time Warner Cable rate card in the appropriate places effectively at close.” He spoke about this in the 1Q16 earning call.

For diversified exposure to some of the largest US cable companies, you might consider investing in the PowerShares QQQ ETF (QQQ). QQQ held a total of ~3.4% of its holdings in Comcast (CMCSA) (CMCSK) and Charter Communications (CHTR) on May 18, 2016.

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