Don't touch that dial—two of the biggest cable providers in the country are joining forces to form a TV & internet provider powerhouse.
Charter Communications has agreed to buy privately-owned Cox Communications in a $34.5 billion deal. This combined colossus will change its name to Cox Communications, while Charter’s Spectrum will become the consumer-facing brand, offering cable, broadband, mobile, and other services.
The megadeal, if and when it closes, will bring together two sizable customer bases: Charter boasts 31.4 million broadband users and 12.7 million cable TV subscribers across 41 states, while Cox has 6.5 million broadband clients in 18 states.
News of this potential cable tie-up caused Charter’s stock to pop by 1.83%—a welcome surge at a time when seemingly every company on the planet is rolling out a streaming service. In such a cutthroat environment, deals like these have become critical for survival: It’s merge, or die.
Cable is consolidating
It wasn’t very long ago that cable TV was the only game in town. But now, cord cutting has become commonplace, forcing Charter and Cox into an uncomfortable self-reckoning.
“Charter’s core market of cable television is seeing declining subscriber growth,” wrote managing director at global consultancy Stax Palash Misra. “The goal of the merger is presumably to broaden its portfolio to better compete against wireless carriers offering 5G home internet services and streaming platforms that are eroding traditional cable TV viewership.”
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This merger comes on the heels of Charter’s acquisition of Liberty Broadband in an all-stock deal. Charter expects there will be about $500 million in annualized cost synergies within three years of closing, further strengthening Charter’s position in a crowded field.
While streaming has stolen plenty of cable customers, that's not the only problem companies like Cox and Charter are facing. Wireless services are eroding the broadband approach to delivering high speed internet to customers, with new competitors like Starlink eating into the incumbents’ market share. But Charter can offer higher speeds at lower costs than these startups thanks to the economies of scale, and today’s deal with Cox was likely designed to underscore those slim advantages.
“Cable is a scale business; added size should help Charter compete better with the larger telcos, tech companies, and Starlink,” explained Co-CIO of Value at Gabelli Funds Chris Marangi.
Don’t forget: Today’s deal will likely test how tough President Trump’s administration will be with antitrust cases. Charter is already lobbying hard for regulatory approval: Its press release talks about “putting America first” by bringing its overseas customer-service jobs back to the US.
Considering the FCC didn’t approve Verizon’s acquisition of Frontier until the company “committed to ending its DEI practices,” that certainly sounds like the right way to woo regulators.—JD