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Comcast To Shed 4M Subscribers To Help Time Warner Deal

Comcast To Shed 4M Subscribers To Help Time Warner Deal
April 28, 2014 2:35PM

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The deal between Comcast and Charter is part of Comcast's plan to convince federal regulators to OK its proposed acquisition of Time Warner Cable. But while handing over 4 million subscribers to Charter might be part of the solution, it might not be enough to get the job done for Comcast, said technology analyst Jeff Kagan.

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Comcast is trying to make its proposed $45B acquisition of Time Warner Cable as easy for regulators to approve as possible by giving millions of its customers to Charter Communications.

By handing over 4 million customers to Charter, Time Warner Cable will no longer be the second largest cable provider. Instead, Charter will take that spot, with a total of 5.7 million subscribers.

A Multi-Pronged Deal

Comcast, which announced the plan on Monday, may be losing 4 million subscribers but only 1.4 million of those are actually being handed over to Charter. The other 2.5 million customers will be placed under the control of a completely new publicly traded company. That company, which doesn't currently have a name, will be owned in part by Charter and Time Warner Cable. Charter will have a 33-percent stake in the company whereas Time Warner Cable will have a 67-percent stake.

The primary goal of the deal with Charter is to keep Comcast below a market share of 30 percent. Even though that figure is not legally required, keeping a relatively low market share will at least allow for continued competition in the cable industry.

TWC Acquisition

Comcast's plan to get rid of some of its subscribers and move others around was first announced in connection with its planned acquisition of Time Warner Cable earlier this year. Now that the details have been released, it is even more obvious that Comcast is looking to make it easier for regulators to approve the deal by showing them that the industry will be better if the acquisition goes through.

We caught up with Jeff Kagan, an independent technology analyst, to get his view on the deal between Charter and Comcast and how that deal will affect the much larger acquisition of Time Warner Cable. He told us that it is pretty common for extra deals like these to be made so the regulators will be more likely to give their approval.

"This is what companies do to grease the process. There's nothing unusual about this proposal. The question is, is it enough? There are two problems with regulators," said Kagan. "One is they want to make sure the deal won't harm the industry. Two is they want to see if they can get something from Comcast to sweeten the deal to make the industry better."

Although boosting Charter's market share and decreasing its own might help Comcast get the deal done, Kagan doesn't think it will necessarily be enough.

"This Comcast offer is part of that solution. But I don't think it'll be enough," he said. "So we'll just have to wait and see what the next steps are from both Comcast, and the regulators."

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