Time Warner Cable Secures Fantastic Price for Shareholders

This transaction will build on the strengths that TWC and Charter possess as stand-alone firms. Both firms bring solid networks to the combined company, creating a cable footprint second in size only to Comcast. The new firm, including Bright House, will own networks passing 48 million homes and businesses (Comcast passes 55 million), claiming 17 million television and 19 million internet access customers (Comcast serves 22 million of each). The combined networks complement each other particularly well in Dallas and Los Angeles. TWC's heavy investment in sports rights in LA should benefit significantly. Increased scale should provide ample opportunities for cost savings, though we were surprised that management downplayed programming cost savings expected as part of this deal.

Given that the company will remain smaller than Comcast, we expect regulators will approve the transaction. The combined company should provide the industry with another entity capable of pushing the envelope with respect to service offerings and network investment, prodding other players to keep pace. The TWC/Comcast deal failed on this measure, as it would have created a highly lopsided industry, with Comcast dwarfing the remainder of its cable peers.

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