Monday, June 24, 2013

Next Cable Operator To Merge

Is Charter Cable the next major cable operator to merge with another?  For years, many have speculated that Cablevision, landlocked in the NY DMA, was a likely acquisition target.  As Time Warner Cable (TWC) is the owned the majority of NYC, they seemed the most likely partner.  But that deal has yet to materialize.  A Charter deal with Time Warner has promise, with synergies in the LA DMA, but other markets are less likely to benefit from having TWC systems nearby.  So if TWC is mentioned repeatedly, who would they prefer to merge with first?

In today's NY Post, speculation comes the Tom Rutledge, a former TWC and Cablevision executive now at Charter, would like to merge and run a bigger operation.  "Although Charter is half the size of Time Warner, the fourth-largest pay TV provider, Wall Street would like to see the two combined under the leadership of Rutledge."  And while that may be what Wall Street wants, TWC executives may have their own ideas as to who should be in charge, despite Rutledge having had a very successful career in cable.  And Charter may not sway the vote if it is true that Cablevision is interested in merging.  "All the deal talk has even put Cablevision patriarch Chuck Dolan in 'listening mode' after years of resisting a tie-up with Time Warner Cable, according to a source."  I think if TWC had its say, a Cablevision deal would be its first move.

One thing is clear, regardless of who merges, their is more need to consolidate to improve profit margins through lower license fees and cost efficiencies.  With an increased push toward streaming and a loss of basic cable subscribers through cord cutting, consolidation will enable cable companies to provide a better connection experience, both in the home and out, by expanding its infrastructure.  And who knows, maybe new businesses that can grow as a result of this larger footprint. 

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