New 'Powerhouse' Created With Charter Acquisition Of Time Warner Cable And Bright House

Charter Communications is putting heat on Comcast by agreeing to buy rival Time Warner Cable for $56 billion and Bright House Networks for $10.4 billion to create the second-largest U.S. cable provider.

The deal values Time Warner Cable at $78.7 billion, with Charter offering TWC investors $195.71 per share in the company in a cash-and-stock deal. Charter also plans to buy competitor Bright House Networks in a separate cash-and-stock bid for $10.4 billion. TWC shareholders are expected to own between 40 percent to 44 percent of the new company that will be called New Charter, according to a release from Charter.

"This puts someone in competition with Comcast, where today it's not really that way," said Vince Bradley, president and CEO of World Telecom Group, a Malibu, Calif.- based carrier services master agent who partners with TWC and Charter. "This does create a new powerhouse with two very channel-friendly organizations in Time Warner and Charter."

[Related: Is Merger With Time Warner Cable Off? Comcast Bloggers Act Like Nothing's Changed]

The combination of the three companies will create a leading broadband services and technology company that will serve nearly 24 million customers -- right behind Comcast who has 27 million customers.

"With our larger reach, we will be able to accelerate the deployment of faster Internet speeds, state-of-the-art video experiences, and fully-featured voice products, at highly competitive prices," said Tom Rutledge, president and CEO of Charter in the release, who will lead the new company if the deal is finalized. "New Charter will capitalize on technology to create and maintain a more effective and efficient service model."

The three companies expect to close the transactions by the end of the calendar year.

Partners are excited about the potential deal, saying both TWC and Charter are committed to the channel and the merger of the three companies will lead to new sales opportunities.

"I'm excited because both companies are very, very committed to the channel," said Andrew Pryfogle, senior vice president of cloud transformation at Intelisys, a Petaluma, Calif.-based distributor of technology services, and a TWC and Charter partner. "When you consolidate a few of these together, you end up building a broader footprint that allows for a lot more high-speed, wide area networking possibilities. Charter will have not just their footprint, but the Time Warner Cable footprint to build high speed, WAN solutions, and we're very interested in that."

TWC told CRN earlier this year that it plans to increase the overall percentage of the company's revenue that comes through the channel, migrate partners to cloud solutions and grow the amount of recurring revenue streams for partners.

Charter said the deals will drive investment in broadband networks, the expansion of optical networks to serve the SMB marketplace, product innovation, and bring new services to consumers and businesses.

"Because [TWC and Charter] are both very channel-friendly, we're pretty optimistic about this one, and we feel it's going to be a good thing," said Bradley. "Bright House is certainly going to bring some new sales opportunities to the table for the channel that weren't there before."

Partners are more hopeful the potential deal will be completed compared to previously failed acquisition attempts of TWC last year from both Charter and Comcast.

In 2014, Charter's lower offer of $37 billion to buy TWC was rejected. Comcast also released plans to acquire TWC last year for $45.2 billion, which ultimately fell through due to regulatory issues.

Federal Communications Commission Chairman Tom Wheeler released a statement on Tuesday following the Charter, Bright House and TWC acquisition announcement, saying the FCC will review and scrutinize the deal.

"The commission will look to see how American consumers would benefit if the deal were to be approved," wrote Wheeler.

Bradley said he is less concerned about regularity issues with the government this time around because the Comcast acquisition of TWC would have created a monopoly in the Multiple-System Operator (MSO) market.

"I don't think it will be met with nearly the amount of pushback that Comcast had, because what you're going to do with this is actually level set the MSO space," said Bradley.

Channel partners need to take notice and prepare as the consolidation of carrier companies in the broadband space continues to increase due to the rapid adoption of cloud and increasing demand for bandwidth, according to Pryfogle.

"Some of the carriers out there are watching this closely because many of them are probably going to need to join forces to remain competitive," said Pryfogle. "What this means for channel partners out there, is that it emphasizes the importance to be aligned with a technology services distributor that gives you the safe harbor for your recurring revenue streams by having rock-solid contracts even in the cases of mergers and acquisitions. … There's going to be more of this to come, and the channel needs to be vigilant in making sure their recurring revenue streams are protected."

PUBLISHED MAY 26, 2015