By Amol Sharma 

Charter Communications Inc. is nearing an acquisition of Time Warner Cable Inc. in a roughly $55 billion deal that would vault the cable operator to the ranks of the biggest U.S. broadband and pay television companies, creating a more potent rival for the likes of Comcast Corp. and DirecTV.

The companies are in advanced talks for a cash-and-stock deal that would value Time Warner Cable at $195 per share, according to a person familiar with the matter. Charter would offer $100 per share in cash and the rest in stock.

As part of the transaction, which could be announced as early as Tuesday, Charter would also merge with small operator Bright House Networks. The combined cable giant would have 23 million total customers, second only to Comcast's 27 million among cable operators.

News of the advanced deal talks comes only a month after Time Warner Cable went back on the block when Comcast terminated the companies' planned merger in the face of serious pushback from Washington regulators. A Charter-TWC deal could be in for a stringent review in Washington as well, some analysts have said.

For Charter, which has 5.9 million residential subscribers in more than 25 states and is backed by cable pioneer John Malone's Liberty Broadband Corp., a union with Time Warner Cable would be the culmination of two years of efforts to become a bigger U.S. cable player and a catalyst for industry consolidation.

Charter and Mr. Malone are betting that increased scale will help the company navigate the industry's choppy waters. Operators must contend with the onset of cable "cord-cutting" as frustrated consumers drop connections, the rise of streaming video competitors from Netflix Inc. to Apple Inc., expected fights with TV channel owners over which networks are worth keeping in the bundle, and the reality of broadband regulations under new "net neutrality" rules.

In 2013, Charter made multiple offers to buy Time Warner Cable but was rebuffed. Its efforts culminated in a hostile bid early last year that was headed off when Comcast struck its ill-fated TWC deal.

This time, Charter took a more light-handed approach. Mr. Malone got more involved, people familiar with the matter say, calling Time Warner Cable Chief Executive Rob Marcus in the early stages of Charter's pursuit to indicate he wanted a friendly deal. Charter's camp made a point of not submitting a lowball bid that would put off Time Warner Cable, the people said.

Still, competition threatened to once again derail the plans of Charter and Mr. Malone: European telecommunications group Altice SA, backed by French cable baron Patrick Drahi, was in hot pursuit of Time Warner Cable in recent days. Mr. Drahi met with Mr. Marcus on May 20 to discuss a potential cash-and-stock deal, The Wall Street Journal reported. Altice last week announced it is acquiring 70% of U.S. midsize operator Suddenlink in a deal valued at $9.1 billion, signaling its U.S. ambitions.

Bloomberg earlier reported that Charter was nearing a deal for Time Warner Cable and Bright House.

For Time Warner Cable, the pact with Charter continues a wild ride over the past two years. The company was struggling last year with video subscriber losses and other problems, when Comcast's $45.2 billion buyout provided what looked like a good exit for shareholders. Then the surprising turn of events in Washington left the company in a lurch--only to result in what looks like another deal in short order.

The backlash to Comcast's bid for Time Warner Cable at the Federal Communications Commission and Justice Department left many cable executives and investors wondering whether any transformational cable industry deal could withstand regulatory review. FCC Chairman Tom Wheeler called cable executives including Time Warner Cable's Mr. Marcus and Charter CEO Tom Rutledge in recent days to convey that they shouldn't assume the agency is against any and all future deals just because of what happened with Comcast's.

Cable companies typically don't overlap geographically and therefore don't compete head-to-head for broadband and cable customers. But in reviewing the Comcast deal, regulators were concerned about the implications of a company having too much control in the broadband market.

A combined Comcast-TWC would have served about 35 million residential and business Internet customers. It would have had at least 57% of the market for broadband Internet service, defined by the FCC as speeds 25 megabits-per-second and higher. A Charter-TWC-Bright House combination would serve nearly 20 million residential and business Internet customers.

For Mr. Malone, the deal would mark his return as a force to be reckoned with in U.S. cable, putting him in position to influence how the industry transitions into a media world dominated by streaming video and broadband.

The 74-year-old was a formative figure in the early days of the cable industry. He took over debt-ridden Tele-Communications Inc. in his early 30s, guiding it through a period of uncertainty and through hundreds of acquisitions in the 1970s and 1980s that made it the largest U.S. cable TV operator. In 1998, he sold TCI at its height for $48 billion to AT&T. (AT&T later sold its cable assets to Comcast.)

The cable-TV market that Mr. Malone and others raced to build at a breakneck pace is now fully mature--and has actually begun to contract. Consumers frustrated by rising cable-TV prices are dropping service in favor of relatively inexpensive streaming video services.

To be successful in the coming years, cable operators will need to lean heavily on their broadband businesses to generate profit growth while limiting shrinkage in their TV business. That means investing in broadband infrastructure, streaming video services and other technologies.

Together, Charter and Time Warner Cable would have the benefits of scale to invest in new technologies. Larger pay-TV companies are also in a better position to push back against programmers' price increases.

Still, a combined Charter and Time Warner Cable would be playing catch-up to Comcast, which has invested large sums already in rolling out new set-top box technology and other enhancements meant to bring some of the ease-of-use and binge-viewing capabilities of the Web to TV. In addition, cable merger integrations can be messy, due to different technologies used by operators, which could also prove a challenge.

Charter would be entering competitive big-city markets where TWC operates, including New York, where TV and ultrafast broadband from Verizon Communications Inc.'s FiOS provides stiff competition.

Shalini Ramachandran contributed to this article

Write to Amol Sharma at amol.sharma@wsj.com

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