The Strategist

TWC to Merge with Charter Communications

05/26/2015 - 15:45

Today it became known that the American cable operator Time Warner Cable concluded the bargain about the sale of the American Charter Communications. The amount of transaction made $78,5 billion.

Daniel Barcelona
Daniel Barcelona
Time Warner Cable (TWC) reported on Tuesday about signing of the agreement with Charter Communications, behind which standing the main shareholder, media magnate John Malone. The entire transaction is estimated at $78,5 billion.

Besides the announcement of signing of this agreement, Charter also reported about improvement of terms of transaction with Advance/Newhouse Partnership (Bright House Network the parental company), the agreement about which was signed in March. According to the new conditions, Charter will redeem Bright House for $10,4 billion. In the new company, 86–87% of the share capital will belong to Charter.

As a result of merge of Time Warner Cable and Charter, a new large player who will serve nearly 24 million clients and work in 41 states of the USA in the market of telecommunication services is going to emerge.

The transaction is being conducted in a situation when the traditional paid television is facing delay of growth and new competitors represented by the Internet companies offering an individual approach like Netflix, or packages of channels like Sony.

The company of larger sizes in this sector can reach bigger economy, partially due to negotiations with content producers.

The transaction will take place literally in a month after Comcast refused the agreement on merge with Time Warner Cable for $45,2 billion because of antimonopoly regulation.

Merge of Charter and Time Warner Cable with other following transactions can lead to elimination of one of the largest in the country Internet service providers, and taking control over more than a 20 percent share of the market of broadband communication, follows from data of MoffettNathanson company.

The Comcast-Time Warner Cable merger, which was not approved by the regulator, would lead to establishing a new operator of the high-speed Internet controlling 40 percent of the market.
The head of the Federal commission on communication (FCC) Tom Wheeler last week visited both companies to tell that the agency is not against the transactions, what was reported by The Wall Street Journal. Each transaction will be estimated proceeding from its individual parameters.

The competition in broadband communication is one of the main subjects of concern for regulators.
As it was reported earlier, Charter will also buy Bright House Networks, sixth in size of the cable operator in the USA, for $10,4 billion. In general, the companies is going to have about 23 million subscribers, what is only a little less than Comcast’s 27,2 million.

Charter and Bright House resumed negotiations on merge as soon as it became clear that the deal of Comcast and Time Warner Cable failed.

The previous agreement of Charter with Bright House depended on whether repayment of Comcast by the Time Warner Cable company is complete.

The media magnate John Malone, through Liberty Broadband Corp belonging to him and being the largest shareholder of Charter, does supports the transaction, and Liberty takes new shares of Charter for $5 billion.

The executive director of Charter Tom Ruthledge probably will become the head the new company.
Last year Charter already offered to buy TWC, however this deal was rejected. The company got to know that TWC have much more interesting partner — Comcast. But the bargain between Comcast and TWC was blocked by regulators (association of two largest players in the market was represented to the authorities as an obvious violation of the antitrust law), and now TWC was ready to unite with the rejected partner.

Yesterday there were hearings that the transaction between two companies is almost ready. However, another sum of purchase - $55 billion - was called. At the same time, there also were rumours that TWC became interested the Luxembourg company Altice. It was even said that the company is conducting active negotiations on receiving funds for purchase from a number of large banks.