Lawsuits recently filed against the freshly consolidated "New Charter" (NASDAQ: CHTR) by 21st Century Fox and Univision beg the question, "who technically bought who in the Charter/Time Warner Cable/Bright House transactions," says media analyst Richard Greenfield.
"We have been under the impression that Charter bought both Time Warner Cable and Bright House. However, Charter appears to have informed both Univision and Fox that Time Warner Cable still exists through an entity called Spectrum Holdings Management Company (SPMC)," Greenfield said in a blog post.
Earlier this week, Fox filed suit against Charter, alleging that it's improperly trying to leverage TWC's more favorable program licensing contracts to carry Fox News and Fox Business. Univision filed a similar suit earlier this month.
The lawsuits reveal what appears to be a bit of a shell game. Neither Charter's original proxy nor its investor presentations for the mergers reference SPMC. However, a May 24 filing to the SEC indicates that New Charter owns two separate legal entities — one that owns the TWC assets and another that holds the legacy Charter assets.
"Essentially, Charter is saying that from a programming standpoint it is not one enlarged MVPD, but rather continues to operate as two smaller legal entities," Greenfield said.
In its suit, Univision claims that Charter is ignoring renewal on a program licensing deal that just expired in June, saying it is covered instead by TWC's deal that expires in 2022.
Univision said it was told by Charter that TWC is managing its cable system. "But everyone knows that is simply not true: the longstanding CEO and the senior executive team of Charter, as well as its pre-existing board of directors, now in fact manage and control all such cable systems, and virtually the entire TWC leadership team has departed," the suit said.
Charter reps referred FierceCable this morning to their original statement on the lawsuit "We have a long-term contract with Univision, and we expect them to honor it."
With New Charter's footprint increasing from roughly 4.3 million pay-TV customers to around 17 million, analysts expect the company to save around $800 million in the first year of TWC and Bright House ownership, efficiencies coming primarily through programming costs.
"We are now wondering whether Charter was too optimistic about its programming cost-savings opportunities with investors or whether broadcasters/programmers misunderstood how the complex structure of a dramatically enlarged Charter could hurt them," Greenfield added.
- read this BTIG Research blog post
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