Charter CEO "Confident" Regulators Will Approve Planned Deals, Touts Consumer Benefits

Illustration by: Paweł Jońca

Tom Rutledge spoke to analysts on a conference call following the company's deal to acquire Time Warner Cable.

Charter Communications CEO Tom Rutledge said Tuesday he was "confident" about getting regulatory approval for the company's two big planned deals for Time Warner Cable and Bright House Networks.

He said that the combined company would provide strong broadband services that would allow consumers to have a "great experience" with online video and gaming and that it would be investing in out-of-home Wifi services, among other things. "This transaction does not reduce competition in any market," he said.

But opposition emerged from at least one quarter Tuesday afternoon, with the Writers Guild declaring in a statement that "mergers and consolidation rarely serve the public interest as distributors use their increased power to squeeze programmers and raise prices for consumers." Adding that it was "extremely concerned" about the proposed deal's impact on content creators, consumers and competition, the Guild said that "once again, pay TV providers are attempting to reduce competition and increase control over cable and Internet distribution."

Other potential opponents of the merger have yet to weigh in.

Rutledge said the deal would provide "tremendous value for all our shareholders," as well as consumer benefits. Rutledge vowed it would ensure "better products at better prices" for consumers, promising "significant" broadband infrastructure investments. He said the combined firm will be about innovation, promising it will allow management to bring better products to market "much faster."

Addressing the larger company's market power, he said it would serve 17 percent of multi-channel TV subscribers in the U.S. and would be the dominant cable firm in only five of the top 20 media markets in the country. And he said it doesn't own content assets, meaning there would not be any concerns such as those that critics had raised about the Comcast-Time Warner Cable deal that Comcast recently abandoned. 

Time Warner Cable CEO Rob Marcus echoed those thoughts, saying that the merged entity would be "significantly smaller" than the failed Comcast-Time Warner Cable and would have "no vertical integration."

The video industry is "becoming increasingly competitive," Rutledge said, providing another reason for the deal.

The executives made the comments on a conference call with analysts after Charter, in which John Malone's Liberty Broadband owns a big stake, unveiled its agreement to acquire Time Warner Cable in a deal valued at $78.7 billion.

Comcast recently abandoned plans to buy Time Warner Cable, the second-largest U.S. cable operator, amid regulators' opposition. Charter, which currently is the fourth-largest U.S. cable firm, has been touting the benefits of consolidation. The deal for TW Cable and a $10.4 billion previous agreement for Bright House Networks — which was confirmed on Tuesday, since it was originally contingent on the Comcast-TW Cable deal — will make Charter the third-largest U.S. pay TV company, behind Comcast and the planned AT&T-DirecTV.

Rutledge said that the work the FCC had done on reviewing the failed Comcast deal should help it go through its review of the new deal more quickly.

“I think there’s a better industry as a result of this combination,” he told analysts, suggesting there could be more cooperation among cable operators on such issues as public WiFi services. "There will be [fewer] people to coordinate to make those new products work."

Rutledge lauded the support of two of the "most astute" cable investors, Liberty and Advance/Newhouse, calling it a "significant endorsement" of the combination.

The companies suggested that there was $800 million in operating-expense savings between Charter and TW Cable over three years, along with possible programming cost-savings over time. "I think that number will prove to be very conservative over time," said Charter CFO Christopher Winfrey. "We have not assumed that the new company can change the arc of the programming cost-curve, but we believe that's an upside over time." Executives said that the TWC rate card should prevail over Charter's in content deals.

Most cost savings would come from joint procurement over a larger footprint, avoiding duplicate costs by combining operations, reduced churn rates and rolling out new products across all three companies' footprint, among other things, management said.

Asked what brand name the combined company would use, Rutledge said the plan was for it to use the Spectrum brand that Charter previously introduced.

Twitter: @georgszalai

5/26/15 1:49 PM Updated by J. Handel to add Writers Guild reaction.

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