(If) Charter and Comcast Come Together, (Almost) Everyone Benefits

With the assistance of jedi cable master John Malone, Charter Communications may be back in play as part of the biggest cable consolidation effort in history.

Apr 28, 2014 at 8:00PM

Inevitably, Liberty Media Chairman and Godfather of Cable John Malone found a way to make the biggest (pending) cable TV deal in history tip to his favor. When Comcast (NASDAQ:CMCSA) announced it had reached an agreement to acquire Time Warner Cable (NYSE:TWC) earlier this year, it looked as though Charter Communications (NASDAQ:CHTR), one quarter-owned by Liberty, had been left out in the cold on what would surely be a game-changing deal for the pay TV industry. Never one to leave the battlefield, Malone, Liberty, and Charter found a way back in the deal. If the megamerger goes through, Charter and Liberty investors may have the best deal of all.

The biggest impediment to a deal between Comcast and Time Warner Cable is regulatory approval. If it goes through, the No. 1 cable operator in the nation will join hands with the No. 2 provider for the low, low price of $45 billion. Understandably, this has consumer-rights watchdogs up in arms, and regulators are in the hot seat to make the best decision.

The proposed merger had already involved the divestiture of more than 2 million subscribers to keep things "fair," but Charter may have just swooped in and sealed the deal, all while getting near what Malone had wanted all along. Step aside Donald Trump, this is a master class in the art of the deal.

Comcast and Charter have agreed to involve the latter in the merger agreement whereby Charter will purchase 1.4 million subscribers from Time Warner Cable's batch, and will also be a 35% owner of a new joint venture between Comcast and it -- accounting for another 2.5 million subscribers. The third element to the deal is the most complex -- a subscriber swap. Charter and Comcast would trade 1.65 million subscribers, likely to strengthen existing markets for the respective businesses. The total cost of the proposed deal: $20 billion.

What it means
Now, this isn't as massive in scale as Charter's original plan to buy Time Warner Cable (an offer that was quickly rebuffed several times by TWC management), as that would have involved Charter picking up more than 10 million subscribers. Instead, it's a much more affordable deal than the prior, $60 billion-plus takeover fee, that ties together the biggest cable companies in the country and presents a united front in what is a never-ending power struggle between content owners and distributors, not to mention the streaming invasion. Charter ensures its competitive position in the consolidating cable business, which many questioned after the Comcast-Time Warner Cable deal was announced.

Will the deal go through? It's purely speculation until regulators stamp "yes" or "no," but it likely makes the merger more appealing to the government as it involves a third party and, in theory, keeps things "competitive." The consumer may come in a distant fourth place in the benefits category, but they were never really part of the deal to begin with. Charter and Liberty investors, keep a close eye on this one.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple

Michael Lewis has no position in any stocks mentioned. The Motley Fool owns shares of Liberty Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers