Charter Communications deal to buy Time Warner Cable will face scrutiny from regulators, but, if completed, will create a strong number two rival to Comcast. Bobbi Rebell reports.
Charter Communications, the number three U.S. cable TV operator controlled by billionaire John Malone, has offered to buy number two operator Time Warner Cable for $56 billion, or about $195 a share. Charter will also complete a previously planned $10 billion deal to buy Bright House Networks. News of the deal comes after a failed attempt, at a lower price last year, and the collapse of Time Warner Cable's deal with the industry's top player, Comcast, over regulatory issues. S&P Capital IQ's Tuna Amobi says, it's worth the higher price. SOUNDBITE: TUNA AMOBI, EQUITY ANALYST, S&P CAPITAL IQ (ENGLISH) SAYING: "It positions the new company to compete more effectively, but not just Comcast, but, keep in mind, the pending acquisition of DirecTV by AT&T. So, I think, you've got now a much more consolidated, you know, companies competing against each other, not just in a new landscape, but also, we think, over the top players, like Netflix and Hulu, so, in a way, we kind of look at this deal as not just a scale play, but also a defensive kind of deal in the face of intensified competition. " Soon after the deal was announced, FCC Chairman, Tom Wheeler, came out with statement saying it would closely review the deal on its merits. Reuters Alina Selyukh: SOUNDBITE: ALINA SELYUKH, REUTERS CORRESPONDENT (ENGLISH) SAYING: "It does kind of draw a line in the sand from the Comcast deal that, of course, unraveled really quickly and created a lot of concerns in the industry that, perhaps, the FCC just didn't want any cable comapanies merging whatsoever, and Chairman Wheeler saying 'Hey, bring your deal. We will look at it on its own merits.' It will face the exact same challenges and standards as any other merger that comes before the FCC. " A key area of regulatory concern would be competition in broadband Internet. If completed, the deal would create a company that controls more than 20 percent of the U.S. broadband market, according to research firm MoffettNathanson. The U.S. cable industry has been consolidating, bulking up to face rising competition from satellite TV and Web-based services from Amazon.com, Netflix and others. But the scale and cost savings could help them offer smaller, more affordable options to consumers. SOUNDBITE: TUNA AMOBI, EQUITY ANALYST, S&P CAPITAL IQ (ENGLISH) SAYING: "I think they have talked about $800 million in annual run rate synergies from this deal. Not even including programming costs, so, we think, ultimately, for the consumer, the new Charter is going to have much more scale, potentially passing along some of these cost savings to consumers." Shares of both companies stocks rose, in part on the belief that the deal had a good chance of approval.