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Mass. Charter Customers Could Soon Head to Comcast


PHILADELPHIA (WGGB/AP) — Charter customers in western Massachusetts could soon have a new cable provider.

As part of Comcast’s efforts to acquire Time Warner Cable, Comcast says that they will sell 1.4 million subscribers for $7.3 billion in cash, and spin-off another 2.5 million subscribers into a company that in which Charter will have a one-third stake.

Comcast and Charter are also expected to exchange about 1.6 million subscribers in various parts of the country.

That swap would impact Western Massachusetts Charter customers.

Alex Dudley, Charter’s senior vice president of Communications, tells ABC40 that under the plan, Charter customers all across Massachusetts would be switched over and become customers of Comcast.

Dudley notes that any changes are still pending final approval as the Comcast/Time Warner transaction is still under regulatory review.

The deal is part of Comcast Corp.’s commitment to federal regulators to shed at least 3 million subscribers and serve no more than 30 percent of all the pay TV customers in the U.S. The company hopes the divestiture will help its $45.2 billion acquisition of No. 2-ranked Time Warner Cable gain approval from federal regulators by the end of the year.

Brian Roberts, Comcast’s CEO, told investors on a conference call that service areas in clusters help to save costs and make the company’s offerings more competitive. A combined Comcast-Time Warner Cable would service roughly 30 million video customers and 28 million Internet subscribers.

The reshuffling amounts to a hefty consolation prize for Charter, which lost the bidding war for Time Warner Cable Inc. when the Comcast deal was announced in February.

Charter CEO Tom Rutledge told investors the transaction will create a “highly efficient footprint for us in the Midwest and Southeast.”

“Today’s announcement represents a very good outcome for Charter,” he said.

Consumer groups criticized the latest dealings.

Matt Wood, policy director for media consumer advocacy group, Free Press, said the deal does nothing to address the problem that cable companies intentionally don’t compete in each other’s service areas. That leads to higher prices and worse customer service, he argued.

“It doesn’t do enough to address the harms of having even fewer companies,” he said.

Charter will form a new holding company that will own 33 percent of the Comcast spinoff, while shareholders of Comcast and the former Time Warner Cable will own the remaining 67 percent of the new company.

The spinoff will take on about $9 billion in debt, reducing the same amount from Comcast’s books. Combined with $5 billion in the after-tax proceeds from Comcast’s sale of subscribers and the equity stake in the spinoff, Comcast estimates the deal will create about $19.5 billion in value for its investors.

Charter said the acquisition of subscribers will boost its residential and commercial video customer base to about 5.7 million from 4.4 million. It is also entering into a management deal with the spinoff company, giving it management of about 8.2 million subscribers, nearly doubling its current size and making it the second-largest cable operator in the country.

Vijay Jayant, an analyst with ISI Group, said Monday’s deal is neutral for Comcast but positive for Charter.

The deal will boost Charter’s earnings per share because it values the newly acquired subscribers at 7.125 times their profitability, which is cheaper than the 8-9 times that Charter’s stock was trading before the deal was announced, he said.

The deal is also strategic for Charter because it is acquiring subscribers in areas where there is less competition from fiber-optic lines built by telecoms companies like AT&T and Verizon, he said. For Comcast meanwhile, “it fortifies their big market concentration.”

He said the asset sale will help Comcast convince the government to approve its Time Warner Cable merger, which he thinks is highly likely to go through.

Comcast said that the new cable provider it is spinning off will have a nine-member board. That will include six independent directors and three appointed by Charter. Comcast itself will have no ownership stake in the spun off company and will have no role in managing it.

Both Comcast and Charter’s boards have approved the transactions, which are subject to Comcast’s deal with Time Warner Cable closing, approval by Charter shareholders and other conditions. Time Warner Cable’s board has also signed off on the deal.

Comcast still anticipates its combination with Time Warner Cable will result in $1.5 billion in operating savings annually.

Information from Ryan Nakashima of the Associated Press was used in this report.

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