Charter Communications (CHTR) is moving closer to gaining federal regulators’ approval for acquiring Time Warner Cable (TWC) — a deal that could set the stage for assets swaps among cable TV firms, including Comcast (CMCSA), analysts say.
The Federal Communications Commission reportedly is set to greenlight the Charter-TWC merger, with conditions, though the deal is still being studied by California’s state regulators. Charter stock rose to just shy of a record high on the report.
Regulators thwarted Comcast’s proposed purchase of TWC in early 2015. Europe-based Altice Group, however, expects to gain approval for its purchase of Cablevision Systems (CVC) in May, the company said. Altice earlier acquired Suddenlink Communications.
If both the Charter-TWC and Altice-Cablevision deals sail through, cable TV firms are likely to explore asset swaps of cable systems in different markets, says a Barclays research report.
“Post the completion of pending cable deals, there is some likelihood of potential asset swaps between the remaining distributors to align footprints more closely and extract more in synergies,” said Barclays. “While the regulatory push-back is fair to consider in this instance, we note that the FCC has concluded in the past that pro-competitive effects of clustering of cable systems tend to outweigh the negatives.”
Even if the FCC approves the Charter-TWC merger, California’s OK might not come until late May, analysts say. Charter also plans to buy privately held Bright House Networks.
Netflix‘s (NFLX) support has smoothed the path for Charter’s deals, analysts say.
Both TWC and Cablevision offer services in the New York City area, a big market.
RBC Capital says the FCC might still be opposed to any sizable acquisitions by Comcast, the nation’s No. 1 cable TV firm. Comcast also owns NBCUniversal.
“Comcast would be unlikely to be allowed to acquire a major cable firm or programmer, but could acquire long-distance assets, a wireless operator, or could engage in clustering and swaps with other cable operators,” RBC analyst Jonathan Atkin wrote in a recent research report.
Charter stock rose 6% in the stock market today, to 198.16. Charter peaked at 199 last March. Time Warner Cable stock rose 3.3% Wednesday.
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