In a heavily foreshadowed but rather complex cable M&A move, Charter is now buying a piece of Comcast. The deal is quite complicated, but following the completion of Comcast’s TW Cable purchase it will see Comcast divest about 3.9M subscribers and get back about $22B.
First, Comcast will be selling 1.4M subscribers directly to Charter. That sort of deal was the obvious move.
Second, the two companies will also be swapping another 1.6M subscribers, helping to make their footprints more contiguous. Charter will gain properties in the Midwest while Comcast will bulk up further in Los Angeles.
And third, Comcast will spin off another 2.5M subscribers into a new publicly held cable operator. Charter will own about a third of that new company, with the rest belonging to current Comcast and TW Cable shareholders. Charter will be helping manage the new company and will have a path to buy the rest of it outright. That last part begs the question why they aren’t just doing it right now.
We knew Comcast would make a move like this, at least in part to assuage the concerns of regulators over its size. And we knew Charter has wanted whatever part of TW Cable it could get, albeit with a grumble or two after getting dumped out of the initial deal. Both companies now get to be bigger, which was the whole purpose in the first place. Or at least, they get to be bigger if someone doesn’t successfully throw a wrench into the regulatory review.
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