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NY Post: Charter Wants to Buy Cox Communications; Alaska’s GCI Will Eventually Become Charter

Three unnamed sources told the New York Post Charter Communications is seeking to acquire privately held Cox Communications, despite repeated assertions from the family owned Cox it is not for sale.

“Tom wants to buy Cox,” said one “highly placed cable source.” Another confirmed the news, but notes Charter has not yet approached Cox with a deal. “If they’re going to sell it to anyone, they’re going to sell it to an old cable guy.”

Cox is America’s third-largest cable company with 6.2 million subscribers. A combination with Charter would still leave Comcast as the nation’s largest cable company. Wall Street has pushed cable companies towards further consolidation, and if Charter doesn’t approach Cox, it is highly likely Altice USA will.

Cox told the newspaper all of this attention is unwanted.

“Cox has been very clear and consistent that we are not for sale and, in fact, we’re aggressively investing in our network, products and strategic partnerships and investments of our own,” Cox spokesman Todd Smith told The Post on Wednesday.

But some cable watchers expect Cox may not want to stay in the family if the price is right. In April, Alex Taylor, the great-grandson of founder James Cox was named Cox’s next CEO, starting Jan. 1, 2018.

Charter may also eventually grow by at least 100,000 new subscribers as John Malone’s Liberty Interactive’s ownership of Alaska-based GCI might not last long. Cable watchers predict Malone will flip GCI to Charter Communications after the deal closes, which would result in a likely quick rebrand of GCI as Charter/Spectrum.

Wall Street Hissyfit: Raise Broadband Prices to $90/Month Immediately! (Or Else)

If the average customer isn’t paying $90 a month for broadband service, they are paying too little and that needs to stop.

That is the view of persistent rate hike advocate Jonathan Chaplin, a Wall Street analyst with New Street Research, who has advocated for sweeping broadband rate increases for years.

“We have argued that broadband is underpriced, given that pricing has barely increased over the past decade while broadband utility has exploded,” Chaplin wrote in a note to investors. “Our analysis suggested a ‘utility-adjusted’ ARPU target of ~$90. Comcast recently increased standalone broadband to $90 with a modem, paving the way for faster ARPU growth as the mix shifts in favor of broadband-only households. Charter will likely follow, once they are through the integration of Time Warner Cable.”

Companies that fail to raise prices risk being downgraded by analysts with views like these, which can have a direct impact on a stock’s share price and the executive compensation and bonus packages that are often tied to the company’s performance.

But there is a dilemma and disagreement between some cable industry analysts about how much companies can charge their customers. Companies like Cable ONE have been aggressively raising broadband prices to unprecedented levels in some of the poorest communities in the country, which worries fellow Wall Street analyst Craig Moffett from MoffettNathanson LLC.

“Never mind that the per capita income in Cable ONE’s footprint is the lowest (by far) of the companies we [Moffett’s firm] cover, or that the percentage of customers living below the poverty line is the highest (also by far),” Moffett told his investor subscribers. “What matters is that there is very little competition in Cable ONE’s footprint. If you want high-speed broadband, where else are you going to go? The unspoken fear among their larger peers is that over-reliance on broadband pricing invites regulatory intervention, not just for Cable ONE, but for everyone.”

Chaplin thinks the risk from gouging broadband customers is next to zero. With cable TV becoming less profitable every day, all the big profits that can be made will be made from broadband, where cable operators often enjoy a monopoly on high-speed service.

According to Chaplin, if customers value internet access, they will pay the higher prices cable companies charge. So what are companies waiting for? Raise those prices!

Wall Street’s Sprint/T-Mobile Merger Drum Circle

Wall Street wants a deal between T-Mobile and Sprint rich with fees and “synergies,” but nobody counting the money cares whether consumers will actually get better service or lower prices as a result of another wireless industry merger.

Recently, more players have entered the T-Mo/Sprint Drum Circle, seeming in favor of the merger of America’s third and fourth largest wireless carriers. Moody’s Investor Service wouldn’t go as far as Sprint CEO Marcelo Claure in playing up the deal’s “synergy savings” won from cutting duplicate costs (especially jobs) after the merger, but was willing to say the combination of the two companies could cut their combined costs by $3 billion or more annually. Based on earlier mergers, most savings would come from eliminating redundant cell sites, winning better volume pricing on handsets, dramatic cuts in employees and back office operations, and spectrum sharing.

“Imagine if you had a supercharged maverick now going after AT&T and Verizon to stop this duopoly,” Claure told an audience in Miami.

Wells Fargo called Sprint’s large spectrum holdings in the 2.5GHz band undervalued, and could be an important part of any transaction.

Sprint has more high-band spectrum than any other carrier in the U.S. Much maligned for its inability to penetrate well indoors and for its reduced coverage area, most carriers have not prioritized use of these frequencies. But forthcoming 5G networks, likely to offer a wireless alternative to wired home broadband, will dominate high frequency spectrum, leaving Sprint in excellent condition to participate in the 5G splash yet to come.

Wall Street banks can expect a small fortune in fees advising both companies on a merger deal and to assist in arranging its financing. Any deal will likely be worth more than the $39 billion AT&T was willing to pay for T-Mobile back in 2011. With that kind of money at stake, any merger announcement will likely be followed by millions in spending to lobby for its approval. Washington regulators ultimately rejected AT&T’s 2011 buyout, arguing it was anti-competitive. Reducing the U.S. marketplace to three national cellular networks is likely to again raise concerns that reduced competition will lead to higher prices.

A merger is also likely to be disruptive to customers, particularly because Sprint and T-Mobile run very different operations and systems. Moody’s predicted it could take up to five years for any merger to fully consummate, giving AT&T and Verizon considerable lead time to bolster their networks and offerings. Moody’s notes Sprint also has a history with bad merger deals, notably its acquisition of Nextel, which proved to be a distracting nightmare.

“If [another merger] stalls or is derailed by operational missteps, the downside is catastrophic,” Moody’s noted.

Cord-Nevers Still Not Interested, Even With “Skinny Bundles”

Phillip Dampier June 14, 2017 Competition, Consumer News, Online Video 3 Comments

Consumers who refuse to pay for cable television today still won’t pay for it tomorrow, even if they are offered a slimmed-down “skinny bundle” of cable networks for less money.

Sanford Bernstein media analyst Todd Juenger continued a series of focus groups with consumers to find if alternatives to cable television are attractive to consumers. The under-40 sample mixed cord-cutters and current cable and satellite customers and presented them with a range of recently available options from Sling, DirecTVNow and YouTube TV and asked if they would subscribe.

Once again, Juenger discovered the group most likely to subscribe to a cable-TV alternative already had pay television and often paid for the top-tier of service. So far, many of those customers are sampling different services but have not taken the last step of dropping their existing cable television package.

Multichannel News reports most won’t disconnect because of the lack of DVR service from most cable-TV alternatives. Until robust cloud-based DVR service is widely available and not hobbled by a lack of fast-forwarding functionality, new streaming services like DirecTVNow probably will never replace cable television.

Cable-nevers — mostly younger consumers that have never paid for cable television, still don’t seem to be willing to pay for online alternatives either. Most cited the fact they watched individual shows, not channels, and most “skinny bundles” invariably lacked certain networks with the programming they wanted to watch. Many would prefer to subscribe to television shows, not networks.

Cable TV pricing, widely slammed by many customers as too high, didn’t seem to matter as much to those participating in the series of focus groups. When asked what cable networks they would be willing to pay $5 a month each to watch, ESPN was rated on top, followed by Food Network, FX, HGTV, Logo, NBCSN, Syfy and VH1 — many carrying niche shows and original content not available elsewhere. If all eight networks were bundled together, that would cost $40, considerably more than the per channel price of much larger packages.

While older cable subscribers tend to watch programming from the same 6-10 cable networks, younger viewers seek out specific shows, and may not be able to identify what cable networks air them. They also watch on-demand more than older viewers.

As Expected, Altice’s IPO Raising Money for Possible Cox, Mediacom Acquisitions

Altice USA today revealed the terms of its long-expected initial public offering likely to bring more than a billion dollars to the company’s merger and acquisition fund that many Wall Street analysts now expect will be spent to acquire privately held Cox Communications and/or Mediacom.

Cox has long claimed it is not for sale. But Altice founder Patrick Drahi has a history of being willing to overpay for the companies he covets, including Cablevision, which was a reluctant seller for at least a decade before Altice made an offer the Dolan family that founded Cablevision couldn’t refuse.

Telsey Group analyst Tom Eagan told his Wall Street clients he expected Altice would be “active” in American cable consolidation, with Cox and Mediacom systems being likely targets. Other analysts have downplayed potential interest in Cable ONE, another likely target, because of the company’s recent aggressive rate increases and the fact its systems are often in economically depressed areas. An acquisition of Cox and/or Mediacom would make Altice the third largest cable company in the country, but it would still be far behind Comcast and Charter Communications, which hold first and second place respectively.

Any acquisition would likely not get much scrutiny on the federal level by the FCC and Justice Department, and most states would likely give the deal only a perfunctory review before approving it.

Altice USA has applied to be listed as “ATUS” on the New York Stock Exchange.

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  • Me: well well well..cutting all their services..getting antenna..all else is on my cell...
  • Matthew H Mosher: Sure, but it's pretty easy to crap on NY when my wife a d I pays these ridiculous tax rates so that MY KIDS can't get broadband. Meanwhile it runs fib...
  • Lee: It would be interesting to see the age cohort distribution of stock owners this analyst champions. I suspect the majority are not in the 20 to 30 rang...
  • Josh: Ugh. If I used Comcast for TV I'd be using it with my TiVo...never with their box. And I always figured the "Xfinity" thing was just to trick people...
  • Josh: LOL! Sounds like basically "we're a huge corporation, so you should do this for us for free". At least hopefully they'll pay now... Of course this ...
  • FredH: Like cable company CEOs need to be told to raise prices by some a-hole Wall Street analyst....
  • Roger W: Go ahead. Raise it to $90. I dare you. I guarantee you it will be the last day I subscribe to cable service. That'll be your loss....
  • FredH: Charter/Spectrum is rapidly catching Comcast in the "race to the bottom"....
  • Phillip Dampier: Yeah, because Charter is hurting so much it cannot afford to extend service itself so it wants welfare to do it. Keep in mind most techs have no clue...
  • Matthew H Mosher: Guaranteed. "BROADBAND FOR ALL (that matter)"...
  • Matthew H Mosher: I spoke with a Time Warner/Spectrum tech today, a very nice guy by the way. (Some background - I am the only house on my road without cable) I had s...
  • Matthew H Mosher: Give me a minute while I pick my jaw up off the floor....

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