Charter Deal With TWC More Likely to Get Approval Than Comcast

By Gautham Nagesh And Joe Flint 

A Charter Communications Inc. merger with Time Warner Cable Inc. stands a better shot at regulatory approval than Comcast's ill-fated attempt to purchase the cable giant last year, according to cable-industry analysts and executives.

Charter is nearing a $55 billion deal for Time Warner Cable--just a month after Comcast backed out of its own bid for Time Warner in the face of opposition from government regulators. As part of the deal, Charter would also merge with smaller Bright House Networks LLC, giving the new entity roughly 23 million total customers--second only to Comcast's 27 million among cable operators.

The deal must pass muster with antitrust officials and the Federal Communications Commission, who were prepared to block the Comcast-Time Warner Cable deal on the grounds the combined company would have too much power over the broadband and online video markets.

"The reason Comcast-Time Warner Cable was a problem for the government was because they were going to have a dominant share of the national broadband market," said Jonathan Chaplin, an analyst at New Street Research.

Indeed, FCC Chairman Tom Wheeler said in April that the merger "would have posed an unacceptable risk to competition."

One likely concern, said Mr. Chaplin, was that Comcast would have used its market power in broadband to thwart the development of competitors' online-video services.

A Comcast spokeswoman declined to comment.

That deal would have combined the two largest cable providers in the country, together serving more than half of all households with high-speed broadband access. A combined Charter-TWC-Bright House would serve 20 million broadband customers, or roughly 24% of the market.

Mr. Wheeler recently called both Time Warner Cable CEO Rob Marcus and Charter CEO Tom Rutledge to assure them that the FCC is still open to other cable deals, provided they are in the public interest, according to a person familiar with the calls.

One possible advantage for Charter: It doesn't own marquee national programming assets that it could potentially leverage against other distributors, which was a concern for regulators with Comcast which purchased NBCUniversal several years ago.

"The facts here are a lot more favorable to Charter than they were to Comcast," said Former Justice Department antitrust official Gene Kimmelman, now the head of the advocacy group Public Knowledge.

Despite a mood of optimism, some cable-industry observers emphasize caution. In sizing up the proposed merger, Craig Moffett, an analyst with MoffettNathanson, said that with a combined 17 million subscribers, a combined Time Warner and Bright House "starts looking a lot like Comcast."

Any deal is still likely to face a lengthy government review. The online video market, in particular, has become a central focus for regulators, as more consumers have cut the cable cord and begun relying on Netflix and other on-demand services for video.

The FCC also has a broader mandate to decide whether it is in the public interest. That could include whether consumers will see their cable and broadband bills increase or decrease as a result of a merger.

Write to Gautham Nagesh at [e-mail] and Joe Flint at [e-mail]

Access Investor Kit for Charter Communications, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US16117M3051

Access Investor Kit for Comcast Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N1019

Access Investor Kit for Comcast Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N2009

Access Investor Kit for Time Warner Cable, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US88732J2078

Subscribe to WSJ: http://online.wsj.com?mod=djnwires