In a broad-ranging address to shareholders, Liberty Media Chairman John Malone laid out the reasons he supports the proposed $56.7 billion merger of Charter Communications (NASDAQ: CHTR) and Time Warner Cable (NYSE: TWC), pointing specifically to the possibility of a Wi-Fi calling service as one outcome.
Claiming that the merger will "wake up a sleepy cable company that was treading water and pleasing shareholders with buybacks," Malone said the combined Charter and TWC could introduce a Wi-Fi-based wireless service that would compete with AT&T (NYSE: T) and Verizon. Liberty is Charter's largest shareholder.
As he noted, TWC was among a consortium of top cable companies that sold wireless spectrum to Verizon (NYSE: VZ) in 2012 for $3.9 billion. As part of that agreement, TWC, Comcast (NASDAQ: CMCSA), Cox Communications and Bright House Networks have the option to enter into a wireless MVNO agreement with Verizon.
It is widely believed that the winning formula for a Wi-Fi-based calling service is to blend Wi-Fi with an MVNO agreement with a top cellular network.
"The concept that Comcast, a greatly enlarged Charter and Cox could together offer a Wi-Fi-optimized connectivity service with a default to a Verizon MVNO is interesting," Malone said.
The possibility of offering such a Wi-Fi calling service could help Charter score regulatory approval for its purchase of TWC, Malone noted, with the FCC eager to increase competition for AT&T and Verizon.
Meanwhile, Malone said TWC will operate much more efficiently under Charter's ownership. He said Charter can make all of its TWC channels digital while also ridding TWC of standard definition channels and duplicate versions of HD channels--and then using the freed-up bandwidth for speedier broadband. He also said that Charter's cloud-based video system will reduce TWC service calls.
"If we can take truck rolls and calls out of the business … we don't have to raise prices. We can drive simplicity," Malone explained.
Speaking in broader terms than just the merger, Malone also condemned the pay-TV industry's 6-year-old multi-screen initiative as flop, declaring "TV Everywhere is TV Nowhere."
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