Charter Communications has not given up on its ambitions to grow through mergers and acquisitions after its hostile bid for Time Warner Cable was eclipsed last week by Comcast’s proposed $45.2bn friendly deal for the cable operator.
Charter remains on the prowl for deals that would boost its base of about 4m subscribers, Tom Rutledge, Charter’s chief executive, said on Friday during a call with investors.
“We are still interested in wisely acquiring subscribers through M&A when that opportunity arises,” he said. “If the landscape changes in such a way that we see opportunity, we will be opportunistic and take advantage of it.”
Charter, the fourth-largest cable operator in the US by subscribers, is being forced to rethink its strategy after spending the past several months circling Time Warner Cable, advocating for consolidation of the fragmented US cable industry.
Charter shares tumbled after news of the Comcast-Time Warner Cable tie-up last week and were trading at about $125 on Friday after previously hovering around $138.
While Charter remains open to deal making, Mr Rutledge emphasised that the company’s main opportunity now lay in growing its business by increasing its penetration into the 7m homes it already passes. The company counts about 4.2m video subscribers and 4.4m broadband customers.
“That is where the biggest ROI [return on investment] is. If Charter does that successfully, we will create enormous value for shareholders,” he said. “I don’t think the landscape changing precludes that opportunity.”
His remarks came as Charter reported net income of $39m for the fourth quarter, up from a loss of $40m for the same period a year before. Revenues increased 12 per cent for the quarter to $2.1bn, thank to growth in video and internet sales.
Industry executives have argued that consolidation would put cable companies in a better position to compete against satellite and telecom operators, as well as fend off the rising trend of “cord cutting”, as people cancel pay television subscriptions and turn to cheaper online streaming options such as Netflix and Amazon. Consolidation also could help cable operators in their battle with programmers against rising costs.
“On the negative side of the ledger, however, there is still the nagging problem of programming cost. Absent a deal, it is hard to see what can stop the rise,” said Craig Moffett of MoffettNathanson Research.
Last May, John Malone’s Liberty Media spent $2.6bn on a 27 per cent stake in Charter. Within weeks, Liberty executives approached Time Warner Cable executives about a deal with Charter. Several advances were rejected until Charter made public a hostile cash-and-stock offer for Time Warner Cable valued at $132.50 a share. Comcast swooped in with an all-share bid worth $158.82 per share.
News emerged last week that Charter had expressed interest in acquiring either some or all of the 3m subscribers that Comcast has pledged to release as part of its effort to persuade regulators to approve the proposed combination of the top two US cable operators.
A Comcast-Time Warner Cable tie-up would control about a third of the US pay-television and broadband markets. Documents released last week showed that Comcast has promised not to agree to any such sales until late May at the earliest.
Market rumours have suggested a possible follow-on deal involving Cox Communications, the third-largest US cable operator by subscribers, but the privately-held company has maintained that it is not for sale.
Get alerts on Time Warner Cable Inc when a new story is published