Bright House purchase leaves Charter poised to jump on TWC if Comcast merger fails

Charter Communications (NASDAQ: CHTR) says its $10.4 billion purchase of Bright House Networks will help it assimilate Time Warner Cable (NYSE: TWC) systems acquired via the complex, three-way GreatLand Connections deal.

A possibility not acknowledged by Charter, but left wide open, nonetheless: Would the Bright House acquisition also help if federal regulators end up rejecting Comcast's (NASDAQ: CMCSA) proposed $45.2 billion purchase of TWC, leaving the latter asset once again open for Charter to try to buy for its own?

Speaking to media investment analysts on Tuesday, March 31, shortly after announcing the combination cash and stock purchase of Bright House from billionaire Si Newhouse, Jr., and his Advance Media empire, Charter President and CEO Tom Rutledge and CFO Christopher Winfrey described the Bright House deal as "complementary and supportive" to the Comcast-TWC merger.

"Our goal is to have the Comcast-Time Warner Cable deal close," Rutledge said, adding that Charter and Bright House would have to renegotiate if the larger deal was nixed. "If the TWC-Comcast deal doesn't occur, although we expect it to occur, you have a different asset, and you would have to talk about what those assets are in the deal."

Bright House is a company still steeped in TWC culture and technology.

The company's origins stem from the 2002 dismantling of a partnership between Time Warner Entertainment and Newhouse/Advance. As part of the deal, Newhouse picked up the cable systems that came to be known as Bright House, and the operator continues to have a strong service and technology collaboration with TWC.

"Bright House will make our Time Warner Cable integration better," Winfrey said, "because of their deep knowledge of Time Warner systems and software, and because the systems that Bright House has developed within their own company are consistent with TWC structures. They're actually in a higher state of readiness, and their skills sets are more directly applicable, to what we're acquiring from TWC."

Bright House brings around 2.1 million video subscribers and around 1.9 million broadband customers to Charter, as well as being situated in the coveted central Florida region that includes Orlando, Tampa and other fast-growing parts of the state.

To acquire Bright House, Charter will pay $2 billion in cash while making Newhouse and Advance significant stakeholders in Charter. Upon the regulatory close of the deal, Liberty Global--already a large Charter investor--will invest another $700 million in the company. Newhouse/Advance and Liberty will each have three seats on the 13-member Charter board.

Both Rutledge and Winfrey were effusive about the growth possibilities the deal brings in the Florida region, which currently has about 4 million Bright House passings.

"The opportunity for unsold passings is significant," Winfrey said. "We think that the Bright House footprint has a lot of opportunities--this is one of the fastest growing places in the county. We expect Florida will continue to grow more rapidly than the rest of the country."

For his part, Rutledge touted the perfunctory benefit of greater program licensing leverage that only consolidation can bring, noting, "We now buy programming for over 10 million video customers, and programmers can take advantage of our scale."

Rutledge also noted that Charter's cloud-based Spectrum Guide interface, which is designed to run on almost any set-top, will make the GreatLand and Bright House integrations much easier.

This even applies to the Comcast X1 boxes that will be part of GreatLand.

"We think we can step into that platform and run it as it is with our unique user interface," Rutledge said.

For more:
- see this release
- see this NYT article
- see this WSJ article

Related articles:
Charter to buy Bright House for $10.4B
Charter in talks to buy Bright House, report says
Charter CFO Winfrey: We want to bundle programming by genre
Charter more ready than ever to go after TWC if Comcast can't close deal, Liberty's Maffei says
Charter, Dish executives among new pay-TV industry stars to watch in 2015

Suggested Articles

Comcast Spotlight, the advertising sales division of Comcast Cable, has hired Melanie Hamilton as vice president of national sales.

Video measurement and analytics company Comscore will lay off approximately 8% of its workforce as part of a plan to reorganize its technology, product and…

The big four U.S. wireless carriers don't practice their video throttling uniformly.