By Ben Fox Rubin
Comcast Corp. and Charter Communications Inc. reached a deal for
Comcast to divest millions of subscribers, helping it smooth over
regulatory concerns involving its $45 billion deal for Time Warner
Cable Inc.
As part of the agreement, Comcast will divest about 1.4 million
existing Time Warner Cable customers directly to Charter for
cash.
Additionally, Comcast plans to create a new publicly traded
company that will serve another 2.5 million existing Comcast
customers. Comcast shareholders would own 67% of that new company
and Charter would own 33%.
The agreement also included a deal to swap 1.6 million Time
Warner Cable customers and 1.6 million Charter customers in a
like-kind exchange, which the companies said will improve their
geographic footprints.
The new Charter agreement is contingent on the Comcast-Time
Warner merger being completed.
"Today's Agreement follows through on our willingness to divest
subscribers, while also marking an important step in our merger
with Time Warner Cable," Comcast CEO Brian Roberts said in a
statement.
Charter earlier this year lost out on its long-running bid to
acquire fellow cable operator Time Warner Cable, after rival
Comcast reached a $45 billion deal for TWC. However, last week The
Wall Street Journal reported that Charter appeared to be in line
for a consolation prize, with the company and Comcast in advanced
talks toward a complex deal where Charter could end up with nearly
four million additional subscribers. To alleviate regulatory
concerns, Comcast had said it plans to divest millions of
subscribers.
The companies said the divestiture deal would make Charter the
second-largest cable operator in the U.S., a move that would help
advance the growth strategy set out by Charter and its biggest
shareholder, Liberty Media Corp., to consolidate the cable
industry. Charter is currently the fourth-largest U.S. cable
operator.
Charter separately reported its first-quarter results Monday
morning, with the company posting a narrower loss for the
period.
Charter reported a loss of $37 million, or 35 cents a share,
compared with a year earlier loss of $42 million, or 42 cents a
share.
Revenue jumped 15% to $2.2 billion, helped by the July
acquisition of Cablevision Systems Corp.'s Bresnan Broadband. Video
and Internet revenue grew, though voice revenue declined.
Analysts polled by Thomson Reuters recently expected per-share
earnings of 12 cents and revenue of $2.18 billion.
Charter found success recently in its effort to slow its
video-subscriber losses by focusing on speeding up its broadband
speeds and adding more high definition TV channels. The company
gained 18,000 customers in the latest period, compared with losing
25,000 a year ago.
Charter also added 136,000 Internet customers in the first
quarter, compared with 107,000 a year ago.
Write to Ben Fox Rubin at ben.rubin@wsj.com
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