Charter-Time Warner cable deal reflects shifting TV market

New York

TRYING to succeed where Comcast failed, Charter Communications has struck a deal to buy Time Warner Cable, an acquisition that would create a powerhouse in the consolidating American cable and broadband industry.

Charter announced on Tuesday a US$56 billion deal for its larger rival and an approximately US$10 billion takeover of a smaller competitor, Bright House Networks. With those deals, Charter will become a significantly stronger rival to Comcast, the giant of the cable industry, which had until last month sought to buy Time Warner Cable itself until the plan met resistance from federal anti-trust regulators.

The flurry of dealmaking reflects the efforts of an industry grappling with a tectonic shift in how Americans watch and pay for television. With customers increasingly turning to the Internet for videos, cable companies have sought to combine to gain bigger scale and negotiating leverage with content providers.

Time Warner Cable is the second-largest cable operator in the US and has long been viewed as an important trophy for any company looking to dominate the US cable and broadband landscape. Buying Time Warner Cable and Bright House will transform Charter into the most serious competitor to Comcast to date. The two acquisitions will approximately quadruple Charter's customer base to about 24 million, compared with Comcast's 27 million.

Under the terms of its deal, Charter will pay about US$195 per Time Warner Cable share in cash and stock. That is almost 14 per cent higher than Time Warner Cable's closing stock price on Friday - and 47 per cent higher than Charter's original bid for its rival from early last year. To help finance the deal, Charter will sell US$5 billion worth of stock to Liberty Broadband, part of the telecom empire owned by the billionaire John Malone. NYT