The US cable industry ushered in major consolidation! CHTR.US acquires Cox Communications for $34.5 billion

The Zhitong Finance App learned that CHTR.US (CHTR.US) has agreed to merge with privately held Cox Communications. This deal will unite the two largest cable TV providers in the US. According to a statement released on Friday, the deal valued Cox at around $34.5 billion (including debt). The Cox family will be the largest shareholder in the merged company, holding 23% of the shares and will have a seat on the board of directors.

The deal is expected to be one of the largest mergers of the year. Currently, cable TV companies are facing increasingly fierce competition from wireless operators such as AT&T (T.US) and T-Mobile US (TMUS.US). These wireless carriers are attracting broadband customers originally belonging to cable TV companies through their internet products. At the same time, streaming media companies such as Netflix (NFLX.US) have also disrupted the traditional pay-TV business.

In November of last year, Liberty Media Chairman John Malone said at Liberty Media's Investor Day in New York that in order to maintain competitiveness, Tescom should be allowed to merge with a media or telecom competitor. This statement raised expectations from the outside world that Tescom might carry out a merger and acquisition. John Malone mentioned Cox as one of the potential merger candidates at the time. In fact, Tescom and Cox discussed a potential deal more than a decade ago.

“This merger will enhance our capabilities in innovative, high-quality and competitively priced products, and provide exceptional customer service to millions of homes and businesses,” said Chris Winfrey, president and CEO of Twitch Communications in a statement on Friday.

Cable TV providers and telecom operators have always been in a fierce “battle for ground”, and both sides are trying to compete for the market area that the other side originally dominated. Some cable providers have been selling their own mobile phone plans by leasing network access from major carriers, while telecom operators are in turn vying for cable provider's home broadband subscribers.

The industry generally anticipates that in the future, consumers will be more inclined to buy internet and mobile phone services from the same service provider. This trend is known as “integration.” The merger of Tescom and Cox will enable both parties to compete in this environment, sell products in packages and invest more efficiently in infrastructure.

Bloomberg Intelligence analysts said, “Tescom is actively promoting its integrated mobile fixed bundled services at very competitive prices to increase user acquisition and retention rates.” “At any rate, the entire cable industry is being hurt by increased telecom competition from fiber-optic coverage and fixed wireless access.”

For Cox, the merger with Tescom means the end of a 70-year history of total family ownership. The Cox family entered the cable television industry in the 1960s and developed Cox Communications into the largest private broadband company in the US, providing internet services to nearly 7 million customers. Cox's system and regional coverage are expected to complement Tescom, thereby increasing the chances of this transaction passing regulatory review. Despite this, in the context of Trump's new administration, the deal could still be a “litmus test” for US antitrust scrutiny.

According to data provided by Bloomberg Intelligence, Tescom operates under the Spectrum brand and is the largest cable TV company in the US and the second-largest broadband service provider. By the end of March, the company had more than 12 million video users and around 30 million internet customers. Last year, Tescom agreed to acquire Liberty Broadband Corp. through an all-share transaction. The deal combines two publicly traded companies with substantial shares held by cable TV billionaire John Malone. John Malone remains Liberty Broadband's chairman.