Comcast and Charter merger idea gains Spectrum Tv attention

New Street Research floated the idea that Comcast and Charter could merge as Charter closes on Cox Communications, putting spectrum tv competition and cable consolidation back in view for customers and rivals. The firm’s analysts said Charter appears open to more cable deals, while Charter’s chief executive said the company is focused on finishing Cox.

Vikash Harlalka wrote, “Our biggest takeaway was that Charter is open to doing more cable M&A and doesn’t need to wait for the Cox merger integration to conclude.” He also wrote, “We continue to believe that a Comcast-Charter merger should and can happen. The industrial logic and synergies would be transformative for both companies. Not least among these would be the potential to acquire at least a 50% share of T-Mobile and create the country’s third converged player to stand up to AT&T and Verizon in a facilities-based way.”

Charter’s Cox closing

Charter is in the final stages of closing its acquisition of Cox Communications, with the deal expected in mid-summer. Charter CFO Jessica Fischer said the company looks at opportunities at a good price and with growth potential, and she said she did not think the Cox integration would stand in the way of further acquisitions.

On Charter’s recent Q1 earnings call, Chris Winfrey said Charter is not eyeing anything other than closing the Cox transaction. That leaves the company publicly focused on one deal even as analysts at New Street Research argue it could keep shopping.

Antitrust and footprints

Blair Levin wrote that geographic expansion deals are generally allowed under antitrust rules and said Comcast and Charter do not infringe on each other’s footprints. He said the deal would qualify as a geographic expansion. Levin also said Comcast and Charter have collaborated on a streaming platform, cable technology, new chips, and sharing their Wi-Fi hotspots, adding that antitrust authorities would have had problems with those collaborations if they regarded Comcast and Charter as competitors.

Levin wrote, “This is why, for example, admittedly smaller geographic expansion deals, such as Verizon purchasing Frontier, do not create significant antitrust objections.” He also wrote, “If antitrust authorities regarded Comcast and Charter as competitors, they would have had problems with one or more of these collaborations.”

Sale possibilities

Peter Supino wrote that Charter could be sold to T-Mobile, Verizon, or SpaceX, and he said, “The primary risk to the pair is Charter ceasing to be a stock at all by selling itself to T-Mobile, Verizon or dark horse SpaceX. Charter trades for $2,100/location. The telecom industry is racing to extend fiber to locations at $1,200-1,500 apiece before $600+ to connect the new customers that also cost money to get! T-Mobile and Verizon should attempt to acquire Charter for massive value creation opportunities.”

Supino added, “In Supino’s view, the Trump presidency is the time to try for a merger, given less anti-trust scrutiny.” For now, the public record leaves Charter in Cox mode and analysts pressing a bigger question: whether the next cable deal comes from more buying or a straight-up combination with Comcast.