Charter-Time Warner Cable Deal Approval Odds Rise to 90 Percent, Analyst Says

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TWC CEO Rob Marcus says there is no “specific timetable” as regulators continue their review and adds he is "highly skeptical" about FCC proposals to regulate the pay TV set-top box market.

While regulators continue to review Charter Communications' plan to acquire Time Warner Cable, one big-name pay TV analyst on Thursday raised his odds on the deal going through.

"The odds that the deal will hit a major stumbling block are getting smaller," MoffettNathanson analyst Craig Moffett said in a report. "We’re raising our odds of approval to 90 percent, from 80 percent previously."

He explained that "perhaps the most striking take-away from the hyperbolically-named Stop Mega Cable Coalition is that even within this collection of supposed deal opponents, most don’t actually oppose Charter’s acquisition of Time Warner Cable at all. Most of the coalition members are simply asking for conditions."

But Moffett also emphasized: "To be sure, it is too early to declare Charter’s acquisition a done deal. There are still hurdles to clear, including an exceedingly tedious timeline from the California Public Utilities Commission (CPUC) that stretches all the way to June 10th. And the FCC negotiation over conditions hasn’t even started yet."

Time Warner Cable chairman and CEO Rob Marcus on Thursday during the company's fourth-quarter earnings conference call didn't provide a timing update for the deal review. “Integration planning and regulatory review processes continue to move forward," he said. "Together with Charter, we are working constructively with the FCC and DOJ to ensure that they are in a position to approve the deal expeditiously."

He also highlighted that the FCC last week restarted its 180-day shot clock, which is now on day 124, and New York State has already approved the combination. Marcus also offered that a CPUC public hearing went “well,” adding that "we remain hopeful that the approval process in California can be accelerated."

But Marcus concluded: "All that said, we are still not in a position to provide you with a specific timetable for closing." Asked by an analyst if that meant he felt more uncertain about the process, he said he would not categorize it as a case of more uncertainty.

Asked about Wednesday news that the FCC was looking to discuss proposals that would allow pay TV subscribers to pick the devices they use to watch programming instead of getting set-top boxes from their pay TV provider, Marcus expressed doubt about the plans.

"The fact sheet that the FCC circulated yesterday is a little hard to decipher, so I am not sure we really understand exactly what is being proposed yet," he said, adding that after a mid-February meeting he expects more clarity. "It appears to me that this is an attempt to create regulation that is really unnecessary given the advances that have been made driven by marketplace forces."

After all, almost all pay TV providers have made strides to make video product available through multiple devices “without any imposition of regulation, which, as we all know, can have unintended consequences, that can actually stymie or thwart innovation," he said. Concluded Marcus: “So I’m highly skeptical, but I really do want to reserve judgment."

Asked about the outlook for programming cost increases, the TWC boss said Thursday: “I don’t expect any near-term, fundamental change in the trajectory of programming cost growth.” But he added that there were "some reasons" to believe long-term growth might moderate over time, but emphasized he was “hesitant” to make any firm predictions.

“One of the points of leverage historically that programmers have had is that if we seize to carry a particular network due to an inability to reach an agreement, customers who wanted that network would have no other choice but to switch to an alternative [pay TV provider], and that certainly put pressure on us at the negotiating table," he explained. "As you see more and more programmers making their networks or their content available on an a la carte basis direct to consumers, I think that dynamic changes and it does potentially shift leverage in a manner that could allow us to moderate programming cost growth."

Marcus was also asked about the Google Fiber service, which offers video and broadband services and competes with pay TV operators and which first launched in Kansas City. "They are a real competitor," he said, noting some subscriber losses that were attributable to the competition. But he said TWC has learned from that early experience and feels "very well equipped to compete with Google."

Could there be a Google Fiber launch in L.A. soon? Marcus predicted it was still “a number of years out.” After all, the time between announcements and actual launches is often significant, making launches "multi-year endeavors."