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Charter announces $55 billion acquisition of Time Warner Cable

By Shawn Knight · 15 replies
May 25, 2015
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  1. charter time warner cable comcast broadband acquisition merger time warner regulators cable provider pay tv

    Update: As expected, Charter has now made the official announcement

    Charter Communications is putting the finishing touches on an acquisition of Time Warner Cable in a cash and stock deal valued at around $55 billion. The deal could be announced as early as Tuesday.

    A person familiar with the matter told The Wall Street Journal that the deal would value Time Warner shares at $195 each, a 14 percent premium over Time Warner’s closing price of $171.18 on Friday. Existing shareholders would get to choose from $100 a share in cash with the remainder paid in Charter stock or $115 in cash and the rest in stock.

    Charter will also merge with Bright House Networks when the deal is announced. All said and done, Charter would be the second largest cable operator in the US with 23 million total customers. Comcast currently has around 27 million subscribers.

    It was just one month ago that Comcast called off its planned acquisition of Time Warner. That $45 billion deal was met with strong antitrust concerns from regulators as the combined company would have controlled 57 percent of the broadband Internet market and close to 30 percent of the pay-TV industry.

    Some believe the Charter / Time Warner deal could face similar regulatory hurdles but others aren’t convinced. Because the merger would result in a company that would control just a quarter of the broadband market, it’s likely to get the green light from regulators according to New Street Research analyst Jonathan Chaplin.

    Charter attempted to purchase Time Warner on multiple occasions in 2013 but was repeatedly rejected, resulting in tension between the two. Comcast’s bid gave both parties time to cool off and this time around, Charter is taking a more light-handed approach according to the source.

    Image via Patrick T. Fallon, Bloomberg

    Permalink to story.

  2. Google Fiber...hurry the Heck Up!!!
    You too, SpaceX! btw, those that aren't aware, SpaceX (in partnership with google) is looking to launch sats into low earth orbit to provide world wide internet coverage.
  3. mattfrompa

    mattfrompa TS Evangelist Posts: 576   +73

    As a TWC customer, am pissed. I thought one of the biggest reasons the Comcast deal fell through was their inability to explain how less competition would help customers? But I guess if it's just a quarter of the market...lol With that said, I do want to give TWC credit for generally delivering the speed I am paying for. Just cut out the spam with my bills. I will never buy tv, phone or a top tier internet plan.
  4. Uncle Al

    Uncle Al TS Evangelist Posts: 5,503   +3,893

    Less competition has NEVER helped the customer. It has only helped the corporations take full advantage of a limited field of competitors to gouge the customer. If that were not the truth, anti-trust and similar laws would never have become necessary. Hopefully the government will give this the same treatment as they did the TWC / Comcast merger attempt. Cable companies demand package services because they know in a truly competitive market so many of those trash channels would never be selected, nor would they survive. You simply need to follow the money and the truth is VERY evident.
  5. SirGCal

    SirGCal TS Maniac Posts: 365   +138

    There just needs to be some sort of 'no more cable buyout' set in place so they can not do this anymore. Actually, while that might be nice, far more importantly is that they need to REMOVE the anti-competitive rules so that each can move in on other's turf! THAT is going to be critical for good competition and getting these horrible companies to change their ways.
  6. Kevin82485

    Kevin82485 TS Booster Posts: 175   +47

    I've been really happy with Charter. Been a subscriber for about 5 years straight now. They give all customers 60 Mbps Internet, which is as fast as it says. While I know it should be taken with a grain of salt, every time I run a speed test, I get 60 Mbps. There are no tiered Internet speeds. Right now, because I just recently moved and am therefore considered a new customer, I'm only paying $30 a month right now for Internet and $37 for HDTV and DVR. I have no qualms with playing their game of calling once a year after my rates go up to talk to their retention department and ask for a lower rate or else I'll cancel my service. It works every time and only takes me 15 minutes. I always go back to paying about $110 a month which I personally think is pretty decent. They've told me that now that their infrastructure upgrade is complete that they are going to likely focus on making better cable receivers with more features.
  7. Kevin82485

    Kevin82485 TS Booster Posts: 175   +47

    I think big companies merging can go one of two ways. Either the merger is chaotic, there is no quality of service improvement, and services get worse. Or the merger leads to a better infrastructure, lower prices, and more innovation for customers because of the acquisition of new assets and equity. Sometimes the bigger the company, the more innovative they can be because they can afford to take more risks.

    I know this is apples and oranges and maybe it isn't a good example, but look at cell phone companies. There used to be a lot more cell phone companies, and they were a lot smaller. Cell coverage, at least where I lived, was spotty. Then all these companies merged together, joined their networks, and started expanding and providing better service.

    It remains to be seen, but I don't think this is necessarily bad. It could allow Charter to expand to markets that TWC wasn't in and in which Comcast dominates which would create competition for Comcast.
    mattfrompa likes this.
  8. cmbjive

    cmbjive TS Booster Posts: 777   +139

    Question: Why was the Comcast deal to buy TWC bad, but the Charter Communications deal to buy TWC is seen as good?
  9. Kevin82485

    Kevin82485 TS Booster Posts: 175   +47

    Comcast has 27 millions subscribers and the combination of Charter and TWC is 24 million, still smaller than Comcast. Charter is the 4th largest cable provider while TWC is 2nd. That just shows how much more massive Comcast is.

    Quoting from another article, "There's a big difference between the Charter and Comcast mergers, because the latter would've created a single dominant company and left many consumers with only one option for cable and internet

    The FCC may still block this, but I think it was see as bad when Comcast was trying to merge because of how huge Comcast already is and because of the reputation that Comcast has created with their level of service and customer service. Charter, as far as I can tell has a much better reputation and is much smaller.
  10. Kevin82485

    Kevin82485 TS Booster Posts: 175   +47

    Because this potential merger interests me so much, I have read other articles that say because Charter would become so much larger, that it could lay the groundwork for a wireless network that it could use to challenge major mobile carriers and it will look into expanding out-of-home Wi-Fi.
  11. cmbjive

    cmbjive TS Booster Posts: 777   +139

    So because Charter was smaller it makes sense for them to buy TWC, but not Comcast because they're already big? Does that sound logical to you? And Charter can't be too small if it is buying TWC for close to $55 billion.

    Truthfully, there is no rhyme or reason as to why Charter should buy TWC and have it approved, but not allow Comcast to do it. It seems that the FCC is simply making arbitrary decisions as to what deals to approve and not to approve.
  12. Kevin82485

    Kevin82485 TS Booster Posts: 175   +47

    Yeah actually it makes perfect sense. I did a bit more digging and found some of the figures I stated earlier were a bit off as I said Charter was bigger than it actually is. I'd suggest looking into this deal further than what is in this article, as compared to others, it is sparse on details.

    Comcast is the already the largest cable provider in the US. Charter is the 6th largest and TWC is the 2nd. There is also a 3rd smaller company that is not talked about much in this merger which is Bright House Networks which is the 8th largest. The combination of TWC, Charter, and Bright House still is not to match Comcast's market share.

    Excluding satellite providers from the equation, Comcast has roughly a 37% market share. TWC has 20%, Charter has 7%, and Bright House has 3%. Had Comcast and TWC merged that would have been a 57% market share. ATT, Cox, and Verizon each have an 8% share and they would have been the next closest competitors to Comcast-TWC. 57% to 8%. Now it will be 37% to 30%, which is more fair to the market.

    I think the problem the FCC had was the combining of the two largest companies would create a sort of super conglomerate. Having more than half the market share would have given Comcast too much leverage in the industry.

    The combination of TWC, Charter, and Bright House is 30%, still less than Comcast, but enough I think to put well deserved pressure on Comcast to provide better service. I also think the rhyme and reason for Charter buying TWC is pretty simple, they want to make more money, expand to more markets, and roll out new services such a mobile phone service and out of home Wi-Fi service. Charter has tried unsuccessfully to buy TWC a couple of different times even before Comcast tried, but TWC declined. It's apparent to me that Charter has grand plans to do more with their service and try to be innovative in a stale cable TV business, but they wouldn't be able to do that unless they merge with other companies.

    But the FCC still has not approved this, so don't be accusatory toward them just yet. They've yet to rule on it and provide reasoning behind whatever it is their decision may be.
    Last edited: May 27, 2015
  13. cmbjive

    cmbjive TS Booster Posts: 777   +139

    I'm afraid it still doesn't make any kind of sense. Your entire argument boils down to, "Comcast is too large, so it shouldn't be allowed to get any larger." That's an illogical argument to make. If the Charter/TWC merger leads to Charter becoming the largest cable at some future point provider should that preclude Charter from being able to buy any other cable companies as well?

    And how is it "more fair" that a choice is being removed so that there are two large competitors and several small ones? And it wouldn't matter anyway because in many areas, the choice of a cable provider is limited to only one and you're lucky to get two.

    Mind you, I don't care one way or the other whether Comcast bought TWC or if Charter buys it. I'm just trying to figure the logic of disallowing one and allowing the other to proceed. Comcast probably thought the same as you allege that Charter is doing: Looking to expand into more markets and rolling out new service. Your argument isn't that persuasive in explaining why Comcast was disallowed to buy TWC and why Charter is allowed to do so.

    Also, I'm not being accusatory of the FCC. They might shoot it down, they might approve it. However, they are so far being mum about the deal, whereas they were quite loud and vocal about the Comcast deal. I wouldn't be surprised that the FCC approves this deal and use exactly the logic you are putting forth: Comcast was large and problematic, therefore we don't want them to get more larger and more problematic.
  14. Kevin82485

    Kevin82485 TS Booster Posts: 175   +47

    I just don't get your "it's illogical" opinion. You're comparing apples and oranges. Comcast backed out because of all the potential regulations that would have been imposed on them. Eric Holder is quoted as saying, “...the Department of Justice informed the companies that it had significant concerns that the merger would make Comcast an unavoidable gatekeeper for Internet-based services that rely on a broadband connection to reach consumers.” So they're basically saying Comcast would be too big and have too much control on the industry. So this isn't my argument as you are saying, it's the government's. I think they had a problem with Comcast getting bigger by acquisition rather than internal expansion.

    What remains to be seen is what does the FCC think is too big? When they denied Comcast-TWC they basically said 57% is too big. If they deny this then I think it sends the message that 30% market share is too big as well. But I don't know that they can say that when Comcast alone has 37%.

    Also people in general just really do not like Comcast. They have a bad reputation, and I'm sure that played into the FCC's opinion on the merger. If a company has a bad reputation with customers, that's just one more reason on top of concerns over one company controlling Internet access for over half of American citizens.

    Based on the FCC's prior concerns, I think they are more likely to approve the Charter-TWC merger because the companies won't have a majority controlling interest in the industry. We don't know until they decide, but maybe the FCC's stance is if Comcast or Charter tried to acquire more cable companies in the future, that it would be denied and if Comcast or Charter wanted to get any bigger they just need to expand on their own rather than by acquisition.

    I don't think the FCC has had time to form an opinion or make a statement on this news. This merger was announced just this week. I doubt they have had a chance to fully read any sort of proposals from the companies. The Comcast-TWC merger was announced back in February of last year. The FCC was initially silent about the Comcast-TWC merger then as well, but after many months of people protesting and companies such as Netflix voicing their opinion over Net Neutrality issues that would result from the merger is when the FCC became more vocal.

    I hope you can see how market share dominance can be used as a way to deny a merger. This comes from antitrust and monopoly laws. This is the most common reason for blocking a merger. Four years ago ATT tried to buy T-Mobile, which would have made ATT the largest cell provider in the US, and it was blocked because of concerns that ATT would dominate the industry. Here's an article with more examples: http://blogs.wsj.com/deals/2011/08/31/the-governments-history-of-blocked-mergers/.

    If you don't agree or understand, that's fine. If I debate this any more I would just be repeating myself if I haven't a few times already. You can say denying the Comcast-TWC merger because they'd be too big is illogical, but the fact is it was denied because of that reason. I think concerns over market dominance are a perfectly logical reason to have denied the Comcast-TWC merger. Maybe you mean you think it is illogical to block a merger that would result in 57% market dominance and illogical to allow a merger that results in a 30% market share. If it is, then I think that is a bit illogical because this is a different merger with different circumstances and end results in market share. I think the 30% market share that would result from the Charter-TWC merger is not too big, and I think it is logical for the FCC to approve the Charter merger because it doesn't really raise antitrust concerns when Comcast is already so far ahead of everyone else in terms of market share. It remains to be see what the FCC thinks is logical though.
    Last edited: May 27, 2015
  15. So, again your entire argument boils down to, "Comcast is big and hated and doesn't need to be bigger." It's wholly an emotional argument and not remotely logical. It speaks to nothing about whether Comcast would be able to completely handle more business and how it would be more innovative.

    The same can be said about all the other deals that the government denied. So yeah,you probably would be repeating yourself,but that's because you're not making a convincing argument why Comcast's deal was blocked and Charter's desk should be allowed forward. I mean if your worry is because Comcast would have 57% market share then you should be against any company that has over 50% market share. If it's because a company has a majority market share then you should be looking to want divest Comcast and disallowing the Charter/TWC deal.

    We will just have to agree to disagree.
  16. Kevin82485

    Kevin82485 TS Booster Posts: 175   +47

    Heh OK. There's nothing emotional about the reasoning I presented. It's pure fact. You're quick to say that what I present is illogical, but have not yet stated what you think is logical or illogical about this. I honestly don't think you're reading what I say.

    Here's logic: Company mergers get blocked if the merger could result in a company so large that they threaten to have a controlling interest in the industry which could further result in increased prices, reduced service or overreaching control of a service. Why does it get blocked for those reasons? Because antitrust. Why antitrust? Because fair competition. Why fair competition? Because 'Murica.

    If you can't piece together that logic from the dissertation I've practically put together in prior posts to see any logic, then I can't conceptualize whatever it is you think is a logical argument. I've given examples of why the government blocked Comcast and why they may allow Charter. And this isn't my argument man, it's the government's. Go ask the government if it's logical. Not me. I work in IT not federal trade and regulation. You're confusing what I say as being only my opinion. I'm just stating facts for the blocked merger. That the government was concerned it would cause Comcast to be too big for customers own good. That is fact as written and quoted in countless articles and testimony.

    It depends on how the merger is presented to the FCC. Maybe Comcast had a shitty presentation and were turned down. Maybe Charter will have a great one and get approved. Opinion and bias do play into these rulings. They're humans after all who make a ruling just like a jury in a murder case. It's not clear black and white, yes or no. So it's not totally unreasonable that members of the FCC turned down Comcast because among many possible reasons, Comcast has a negative public perception. Perhaps the FCC had concerns in the direction the company would be headed.

    They may allow Charter for the simple fact that they aren't infringing on any rules, regulations, or law, aren't creating an unfair market place, and gave a killer presentation. Seems reasonable to me.
    Last edited: May 28, 2015

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