For some time now we’ve been hearing about plans for Time Warner Cable to be sold to either Comcast, or Charter or both. The very latest news has Charter (#4) going in alone to buy TWC (#2). This raises some interesting questions about who would be the winners and losers if this transaction gets approved.
The Cable customer – not much change, we hope.
In my humble opinion, TWC is run a lot better than Charter. At the very least TWC never filed for bankruptcy, as did Charter in 2009. If I were a TWC customer (and that is where I get my internet), I’d prefer that TWC buys Charter, not the other way around. And from what I have experienced in the past TWC offers better customer service than Charter.
In any case this doesn’t change the competitive landscape much. Cable operators don’t compete with each other today, or in cable terminology, they don’t “overbuild” each other. So if you live in San Diego, just as an example, your cable provider choices today include TWC, AT&T, Dish and DirecTV. If Charter takes over, you still have four choices.
Charter/TWC Employees – not good.
TWC has been reorganizing and reducing employees at a frenzied rate, perhaps in preparation for a sale. The inside joke is that TWC stands for “This Week’s Change”. When the two companies combine there will no doubt be further consolidation of management. Presumably the new headquarters would be in Charter’s St. Louis, even though many TWC employees have been recently redeployed to North Carolina where many of TWC’s corporate personnel reside.
The Cord Cutter
This might be a who cares for the cord cutter. The trend however is important. Had Comcast instead acquired TWC the resulting power house would have been scary.
The Stock Holder
Clearly the only reason to combine the companies is to make money for the investor. And will it? Using simple math the combination takes Charter from #4 (excludes satellite) to #2. Including satellite operators, the new Charter company moves up the scale to #3. leapfrogging over DISH. If the new company with 16.3M basic subs can take over with no major hiccups that’s a big overnight growth spurt.
One caveat from history however. When Comcast and TWC agreed to split up troubled Adelphia back in 2005, the effects of the so called “integration” were not pretty. One interesting fact about cable operators, is that network designs between any two given MSO’s could be completely different. Switching over millions of subscribers from one network to a new one can be a nightmare, and that’s what happened in Los Angeles in 2008 – major outages resulted to the benefit of DirecTV who picked up many unhappy TWC (former Adelphia) customers. If Charter wants to be successful, they should learn from this bit of history.