Charter/TWC/BHN Likely Will Close in Q1, Acquirer's CEO Says
Charter Communications still hopes to close on its acquisitions of Bright House Networks and Time Warner Cable this year, but "realistically" the deal will wrap up in Q1, CEO Tom Rutledge said Thursday as it and TWC separately announced Q3 results. Charter is making available any information the FCC and Justice Department need as they review the transaction, he said, saying the company hasn't had any discussions with the FCC about potential conditions. Charter also has received approvals needed from most states and raised "nearly all" the financing needed for the acquisition, Rutledge said.
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Charter had a gain of 12,000 residential video customers year over year, compared with a 29,000 loss in Q2 2015. TWC's residential video subscribers dropped by 7,000, its best Q3 in nine years, it said, compared with a 45,000 loss in Q2. Steep multichannel video programming distributor subscriber declines in Q2 had commentators and analysts questioning whether cord cutting was becoming an accelerating phenomenon (see 1508070033). Rutledge said declines in the video market overall are due in large part to consumers' economic woes. "It's an elasticity of demand problem," he said. "Income growth is down -- the population is poorer, essentially." And there is "a theft of service issue" as TV Everywhere and other online products often aren't secured and password sharing is commonplace, he said. "That's a real issue, that affects elasticity of demand."
TWC in Q3 picked up 232,000 residential high-speed data customers, also its best Q3 since 2006. It added 237,000 voice customers during the quarter, lost 121,000 “double play” customers, but added 218,000 “triple play” customers, for its best-ever Q3 subscriber performance ever, CEO Robert Marcus said. Charter said in Q3 it added 37,000 voice customers, with "triple play" penetration of its customer base growing to 32.9 percent. Charter stock closed up 5 percent to $193.33 Thursday, while TWC gained 3.6 percent to $191.82.
Charter said it was exploring whether it would take part in the broadcast incentive auction, though the timing is awkward given the pendency of Charter/TWC/BHN. On a question about usage-based broadband pricing, Rutledge said Charter had no intention of instituting it in the foreseeable future.
On TWC's beta testing of an over-the-top video service, Marcus called it "the next step in the evolution" of its TWC TV app, with the aim being eventually a video offering via Roku or other IP-enabled devices that substitutes for set-top boxes. Still to be worked out are such issues as better picture resolution, ensuring it complies with Communications Act Title VI requirements such as closed captioning and emergency alerts, and creating a complete channel lineup that includes local channels plus public, educational and government access channels, he said. Marcus didn't say when TWC hopes to have such an offering.
If Charter/TWC/BHN falls through, it's questionable whether there could be another buyer for TWC in the wings, Craig Moffett of MoffetNathanson Research emailed investors Thursday. The most likely such buyer would be Altice, he said. But Altice, after agreeing to buy Cablevision and Suddenlink, will be roughly the size of Charter today, "so if Charter's bid ... were to be rejected, why would anyone assume that Altice's would succeed instead?" Moffett said. "One could argue that if Charter can't buy them, no one can."