Comcast Eases Antitrust Concerns Strikes $20 Billion Deal With Charter

ComcastIn an effort to ease antitrust concerns over its merger with Time Warner, Comcast struck a deal with Charter Communications Monday worth a reported $20 billion that will give Charter some 1.4 million of Time Warner Cable’s current subscribers. The move will leave the combined companies with less than thirty percent of all cable or satellite television household subscriptions and elevate Time Warner to the country’s number two cable company.

Pending approval of the merger, Comcast’s 29 million subscribers would still rank it well ahead of DirecTV’s 20 million or Dish’s 14 million customers. Regulators and consumer advocacy groups have weighed in and voiced concerns about the potential the merger poses for decreasing the choices consumers would have in choosing a cable provider. The divestiture plan, which would entail Charter creating a new holding company with a thirty-three percent stake in the offshoot, will only occur upon the approval of regulators. Specifically, the sale would entitle Charter to purchase 1.4 million Time Warner Cable customers for $7.3 billion in cash.

Additionally, the spin-off cable company to be controlled by Charter would be created using 2.5 million current Comcast customers. Charter and Time Warner would then each exchange 1.6 million subscribers with the aim of grouping the two companies’ customers closer together after the merger.  According to reports, officials estimate that Charter is paying $20 billion for the rights to 3.9 million customers.

In January, Time Warner Cable rejected Charter’s offer to buy the company for $37 billion, saying the price was grossly inadequate. Exactly one month later, Comcast intervened and purchased Time Warner for $45 billion. If the deal goes through, the combined companies will be the country’s leading provider of television programming and internet connections with an estimated one in three American homes subscribing. Regulators are now questioning the legality of such a substantial increase.

In the past, laws were in place that prohibited one cable company from controlling over thirty percent of the market. Comcast challenged that rule about a decade ago, which led to its being overturned in 2009 by a federal appeals court. Government regulators will still find a way to oppose the proposed merger with Time Warner, said Justice Department head William Baer. In an interview with the New York Times, Baer said the department has every intention of closely examining wireless and cable industry mergers, noting that regulators are particularly uneasy about a Comcast Time Warner merger because of the potential that the consumer could benefit from certain combinations.

Insiders say the merger will in all likelihood be approved by the Justice Department, despite objections from a panel of Federal lawmakers just two weeks ago. A Senate Judiciary Committee challenged Comcast’s stance that the merger would boost customer service and provide the consumer with more choices. Sen. Al Franken, D-Minn., scoffed at the contention, noting that many consumers oppose the deal because it would give Comcast too much dominance.  The two companies, according to reports, are likely to argue that they do not compete directly and have their own markets, which could quell a lot of antitrust anxiety.

Commentary by Rick Sarlat

Sources:

ABC

USA Today

 

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