Charter’s $55 billion Time Warner Cable capture approved

The $55 billion merger of Charter and Time Warner Cable has been given the green light by the FCC, creating the second largest ISP in the US market. An additional $10 billion deal for Bright House Networks has also been approved.

The consolidation saga has been a protracted ordeal in which market leader Comcast initially looked set to acquire TWC for $45 billion back in February 2014, before anti-competition concerns derailed the deal. After the deal broke down in April 2015, Charter quickly moved in with a $55 billion bid which was swiftly approved by TWC shareholders.

TWC acquisition timeline
February 2014 – $45 billion Comcast bid for Time Warner Cable accepted
April 2014 – Industry competitors and groups voice concerns
December 2014 – FCC holds up Comcast/TWC deal
April 2015 – Comcast confirms deal is off over regulatory reluctance
May 2015 – Charter agrees £55 billion deal with TWC
October 2015 – Competitors contest merger, Netflix shows support
May 2016 – FCC approves merger of Charter, TWC and Bright House Networks

Competition concerns over the initial Comcast deal stemmed from its already dominant position in the domestic broadband market. Ovum’s World Broadband Information Service reckons Comcast occupies top spot with 23.7 million subscribers in the US. With third-placed TWC having 13.6 million subs, marginally behind AT&T, a combined Comcast/TWC entity would dominate the market with more than 37 million active customers. Despite Comcast’s attempt to placate authorities by pledging to divest 3 million customers to its rivals, competition authorities weren’t sold.

“Today, we move on. Of course, we would have liked to bring our great products to new cities, but we structured the deal so that if the government didn’t agree, we could walk away,” said Comcast CEO Brian Roberts at the time.

With 5.5 million subscribers, Charter’s ambitious acquisition of a larger market player will create the second largest market ISP – with subscriber numbers in the region of 19 million on broadband alone.

Coupled with the FCC’s approval of a $10 billion purchase of Bright House Networks, a digital media and cable ISP, Charter has dropped more than $65 billion on bolstering its market position. Such sizeable deals rarely come without strings attached, and Charter confirmed it has made several concessions to regulators. Charter will waive data caps and usage-based billing, and has committed to rolling out high-speed broadband services to under-served areas. The FCC, with its approval of the deal, also said further conditions will be forthcoming.

“The significant benefits of these transactions are clear; greater competition, more consumer and OTT friendly broadband policies, broader access to affordable broadband, and added U.S. jobs,” said Tom Rutledge, President and CEO of Charter Communications. “The conditions are largely extensions of the longstanding consumer friendly values and practices of our company, and based on the commitments we put forward during the review process. Charter will be a stronger competitor in the broadband and video markets, well positioned to deliver these benefits and more to consumers.”

The Charter/TWC transaction represents one of the larger telecoms and media M&As, but falls some way short of the biggest deals ever seen in the industry, including Verizon Communications’ $128 billion purchase of Verizon Wireless from Vodafone in 2013; Time Warner’s $165 billion acquisition of AOL during the dotcom boom; and Vodafone’s $180 billion capture of German telco Mannesmann in 1999 which remains the biggest corporate merger deal in history.

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