By Nicola Leske
Feb 20 (Reuters) – Charter Communications, still
rebounding from its failure to buy larger rival Time Warner
Cable Inc, is left with the prospect of acquiring
smaller players to satisfy its aim of driving U.S. cable
consolidation, according to industry analysts.
Those likely to be on Charter’s potential shopping list
include Cox Communications, Cablevision Systems Corp
, Mediacom LLC and Suddenlink, observers say.
There “are at least a few baby elephants left on the M&A;
savanna,” said Matthew Harrigan, an analyst at Wunderlich
Securities, Inc.
Charter and its billionaire backer John Malone had courted
Time Warner Cable for months, but were outmaneuvered by Comcast
Corp’s $45.2 billion merger bid, announced on Feb. 13.
Malone, whose Liberty Media Corp holds a 27 percent
stake in Charter, has been touting the benefits of cable
consolidation at every turn. The billionaire investor has long
argued that cable companies should team up to fight high
programming costs and competition from telecoms and satellite TV
companies.
In addition, Google Inc announced this week that it
is planning a major expansion of its super-fast “Fiber” TV
network, posing another potential threat to cable operators.
Shareholders are certain to be asking how Charter, the
U.S.’s fourth largest cable operator with 4 million subscribers,
intends to accomplish those goals without Time Warner Cable.
As the country’s second-largest cable operator, Time Warner
Cable has over 11 million subscribers.
Charter will have a chance to update shareholders about its
plans on Friday, when it reports fourth-quarter earnings.
But the cable operator likely cannot approach a potential
target until it knows which cable systems Comcast will spin off,
said Tom Eagan, an analyst with Northland Capital Markets.
Comcast has said it will likely part with about 3 million of
the 33 million subscribers joint subscribers of the two
companies.
Of the two largest cable operators likely to be on Charter’s
list – Cablevision and Cox – Eagan figures that Charter is more
likely to acquire Cox, the country’s third-largest operator. It
is privately held by the Cox family, which might be willing to
sell at the higher multiples cable is getting, he said.
None of the companies that might be on Charter’s list have
the breadth and capability that Charter was looking for in Time
Warner Cable, but there is logic to combining Charter with a
number of smaller companies.
“It may take a little longer but it won’t get as long a
review as Time Warner Cable and Comcast will,” said a person
familiar with the situation, referring to regulatory scrutiny.
Taking a look at Europe may also provide a clue. Malone is
chairman of Liberty Global, Europe’s largest cable
operator, and has expanded his cable empire there over the past
decade via acquisitions from Ireland to Romania.
In January, Liberty Global said it would buy Dutch operator
Ziggo for 10 billion euros ($13.71 billion).
($1 = 0.7293 Euro)
(Reporting by Nicola Leske; edited by Ronald Grover and G
Crosse)
