Charter Communications has agreed to purchase Bright House Networks and Time Warner Cable – a much larger rival – in a deal worth $78.7bn.
1) Who is Charter?
Charter Communications is currently the fourth largest cable provider in the US, following Time Warner, Comcast and Cox Communications. It services about 7 million customers in 29 states. It was born in St. Lois and is backed largely by billionaire and media mogul, John C. Malone.
2) Long-standing desire to acquire Time Warner
Charter Communications has shown interest in purchasing Time Warner for many years. Its chief executive (CEO) Thomas Rutledge even went as far as to write an open letter to Time Warner’s CEO, Robert Marcus, saying: “I believe we have a significant opportunity to put our companies together in a way that will create maximum, long-term value for shareholders and employees of both companies.”
3) Time Warner wants to be bought
Time Warner has been seeking acquisitions to help it navigate through the ever-changing telecoms landscape for years. Earlier this year, a seemingly-kismet merger with Comcast fell through after Federal Communications Commission (FCC) chairman Tom Wheeler said the deal “would have posed an unacceptable risk to competition and innovation.” Simply put, a Time Warner-Comcast deal would make the duo too much of a threat to other telecom providers.
4) What does this mean for the telecoms industry?
If the deal between Charter Communications and Time Warner is finalized, it would bring Charter’s overall customer base to 24 million, still slightly less than Comcast’s 27 million. This would make Charter and Comcast the two biggest competitors in the industry.
5) Looking forward
The Charter-Time Warner duo, to be named New Charter, will still have to invest a sizable amount in its services to properly compete with Comcast. Still, Charter expects an annual cost savings of $800m. If the deal falls apart, Charter has promised Time Warner a ‘breakup fee’ of $2bn.
