Charter Communications (NASDAQ: CHTR) may have failed to "bag the elephant" when its coveted acquisition target, Time Warner Cable (NYSE: TWC), agreed to Comcast's $45.2 billion merger proposal, but it's doing just fine as a stand-alone company.
That's the conclusion put forth Monday by MoffettNathanson Research analyst Craig Moffett, who argues that--despite not getting TWC--Charter will end up with less debt, better clustered systems and less competitive exposure to Verizon FiOS (NYSE: VZ).
"Lost in all this M&A storytelling … is the case for Charter as a stand-alone operator," Moffett writes. "All of the reasons to like Charter before the deal are still in place: Charter offers the same attractive growth profile it had before, but now will have an even lower FiOS overlap (4 percent now, but declining to almost zero).
"Perhaps the biggest (and least appreciated) growth driver in the Charter story is the realization of consumer price step-ups as last year's promotional pricing rolls off. This alone could provide as much as a 25 percent upside to revenues."
Moffett noted in earlier commentary that while Charter failed to effectively bid for TWC, it did get an "epic bouquet toss" from eventual groom Comcast (NASDAQ: CMCSA).
Contingent on the regulatory approval of the Comast-TWC merger, Charter has an agreement to pay Comcast $7.3 billion for 1.4 million subscribers. Comcast will also divest another 2.5 million subscribers into a new publicly traded company that will be one-third owned by Charter.
All of this will render Charter the second biggest cable operator in the U.S. beside the newly merged Comcast-TWC, with about a 6 percent market share.
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Related links:
Moffett: AT&T-DirecTV deal will get done, but not without regulatory 'perspiration'
Willner tapped as CEO of new Comcast-Charter SpinCo venture