Charter Communications, a cable and telecommunications company, recently announced that it would acquire Time Warner Cable in a $55 billion deal. Along with Time Warner, Charter also plans to acquire Bright House Networks in an additional $10 billion deal. While Bright House is a much smaller provider, Charter and Time Warner are the second and third largest cable television providers in the United States. Charter CEO Tom Rutledge claims the combined companies will provide customers with improved internet speeds and more competitive pricing.
Analysts frame the deal as one that is looking to the future of the industry. A greater ability to provide customers with faster internet speeds will allow the combined company to satisfy the ever-increasing demand for internet capable of streaming online video and playing games. The combined company should also be better able to expand into other internet-based services.
As with any merger involving two significant players in an industry, there is some concern that the deal will fail to receive regulatory approval. Just last month, Comcast was forced to abandon its acquisition of Time Warner due to regulatory concerns and public opinion. While most expected Comcast’s proposed deal to receive regulatory approval, the concerns that ultimately doomed the Comcast deal appear not to be present with Charter’s attempt to acquire Time Warner. Analysts expect that the proposed deal will be scrutinized by regulators in terms of its effect on the “public’s high-speed internet access” rather than its effect on cable TV (which would likely have had a greater significance in the past). The failure of the Comcast deal illustrates that anti-trust concerns remain strong in government and approval is not simply a token hurdle that deals must clear.
While few are treating regulatory approval as a certainty, most with knowledge of the industry expect approval to eventually come. A successful Comcast and Time Warner deal would have combined the two largest cable companies in the country. Unlike the failed Comcast deal, Charter’s acquisition of Time Warner would create a second strong player in the cable TV and high-speed internet industry, as opposed to one dominant company that reduces competition and choice for consumers. Because Charter and Time Warner serve entirely different markets and rarely directly compete, the deal will have little effect on consumer choice.
While industry consolidation will always raise concerns, many believe that the deal will actually be beneficial to consumers. Customers will likely see better services ranging from greater programing and content availability, to faster internet speeds and access to more wireless hotspots outside the home.
Although the deal will create a stronger and much larger challenger to industry giant Comcast, it seems to also be strongly incentivized by the compensation packages of executives at both Charter and Time Warner. Executives at Time Warner are likely to receive exit packages in the tens of millions of dollars while those at Charter will likely see a significant raise as executives of the combined company.