Verizon Exploring Combination With Cable Firm Charter Communications -- Update

By Shalini Ramachandran, Ryan Knutson and Dana Mattioli 

Verizon Communications Inc. is exploring a combination with Charter Communications Inc. that would unite two giants in search of growth in a rapidly consolidating media and telecom landscape, according to people familiar with the matter.

Verizon CEO Lowell McAdam has made a preliminary approach to officials close to Charter and Verizon is working with advisers to study a potential transaction, the people said, though there's no guarantee a deal will materialize.

It is unclear whether Charter executives, including Chief Executive Tom Rutledge, would be open to a transaction. The effort could be complicated by Charter's ownership structure, which includes cable tycoon John Malone and the Newhouse family.

A combination would bring together Verizon's more than 114 million wireless subscribers and what remains of its landline business with Charter's cable network, which provides television to 17 million customers and broadband connections to 21 million.

Verizon has a market capitalization of $194 billion and more than $100 billion in debt, while Charter ended Wednesday's session valued at about $85 billion.

Both Verizon and Charter face challenges to their core businesses. Growth in the U.S. wireless market has slowed and pricing pressure has chipped away at profits. Furthermore, the cable-TV business is threatened by cord-cutters and over-the-top video services.

Any transaction would face a close regulatory review, given the sheer size of the businesses and some overlapping services. Both companies provide home broadband and television services in certain markets, including the greater New York area. On its fiber-optics network, known as Fios, Verizon has about 5.7 million high-speed internet customers and 4.7 million TV subscribers, primarily in the Northeast.

It would pose a big test for new antitrust enforcers under the administration of President Donald Trump, who during the campaign expressed concerns about media consolidation. In October, he vowed to block AT&T Inc.'s $85.4 billion purchase of Time Warner Inc., saying it put too much power in the hands of too few, but he hasn't spoken publicly on the transaction since the election.

Many deal makers are hopeful a more traditional Republican administration will be merger friendly. Mr. Trump recently appointed Ajit Pai, a Republican, as chairman of the Federal Communications Commission, which oversees telecom mergers in addition to the Justice Department.

In his testimony before the Senate, Mr. Trump's selection for Attorney General, Sen. Jeff Sessions, said he wouldn't have a problem blocking mergers deemed anticompetitive. "I have no hesitation to enforce antitrust law," Sen. Sessions said on Jan. 10. "There will not be political influence in that process."

Write to Shalini Ramachandran at [e-mail], Ryan Knutson at [e-mail] and Dana Mattioli at [e-mail]

(END) Dow Jones Newswires

January 26, 2017 09:40 ET (14:40 GMT)

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