Company / division: Charter
Charter Says it Doesn’t Want to Buy Sprint (Jul 31, 2017)
There were lots of reports over the weekend that Sprint and Charter were approaching a tie-up, just after the end of the exclusive negotiating period between the two and Comcast which began just over a month ago. However, Charter has now come out and said that it’s not interested in buying Sprint, which isn’t necessarily the deal being discussed, but is as close as Charter can get to saying it’s not interested in any deal, given that it has a fiduciary responsibility to keep the door to potential acquisition offers open. It’s been fascinating to watch this latest round of SoftBank-driven Sprint merger mania, because whereas last time Sprint was to merge with another player (T-Mobile), it was the US government that shot it down. This time around, the biggest barrier is a lack of willing partners. T-Mobile is certainly far less in need of the merger now than it arguably was several years ago, while the cable companies may well want to merge with a wireless industry, just not the weakest of the big four US providers. Sprint has the poorest network, the poorest financial performance, the lowest overall subscriber growth, and the least subscribers of any of the big four operators, making it the least attractive merger partner of the four, with T-Mobile much more enticing at this point. It’s still possible that SoftBank will try to buy Charter, and if the price is high enough that Charter’s management will feel they have to accept the offer, but it’s clear at this point that this will happen against their stated wishes, which will make any merger process that much more challenging than it would already have been.
Spectrum TV, which is the brand for television services offered by the entity formed from the merger of Charter, Time Warner Cable, and Bright House Networks, is offering an over the top pay TV streaming service. So far, that probably sounds pretty me-too, but there are two important differences: firstly, the base $20 tier excludes all sports networks, and secondly, because this service is being offered by an existing pay TV provider in its franchise area, it includes the local broadcast channels. The big caveat is that the service is only available to Spectrum broadband subscribers, so this isn’t a national offering, but it’s arguably the most comprehensive set of basic channels offered by any of the streaming services, and sports and premium channels can be added at a pretty reasonable price ($12 for ESPN and others, and $15 for a premium package). I’ve long argued that the existing pay TV providers are in the best position to offer a really compelling streaming TV service, but of course they’re also the least incentivized to do so, because that means potentially cannibalizing their legacy pay TV services. As such, we’ve only seen fairly hamstrung offerings from the big satellite providers (DISH’s Sling and AT&T’s DirecTV Now). But Spectrum’s new service suggests we may finally be seeing some serious movement from the cable guys, and were Comcast to move in this direction too (something it’s been testing on a limited basis so far), I have to believe that would force the remaining telco and satellite players to get more serious about providing comprehensive streaming pay TV services.
Verizon Had $100bn Offer for Charter Rebuffed (Jun 1, 2017)
I continue to be really skeptical on this deal or anything like it – the only way it could be approved is if Verizon or Charter sold or spun off their operations where the two companies compete, and even then I’m not sure there’s appetite for another mega merger between broadband and TV providers. I see the rationale – the TV business in particular is all about scale, and AT&T and Comcast tower over the rest of the market (even the new Charter has almost 6 million fewer TV subs than Comcast, and over 8m fewer than AT&T-DirecTV). Combining Verizon and Charter’s subs would approach Comcast’s scale in video, while adding wireless, which Comcast is about to add through a partnership with Verizon. But there would be massive challenges here – combining incompatible technologies for delivering voice and data services to homes, along with the cultures of a telco and cableco. And of course regulators would be likely to be very skeptical at the outset (though this administration will certainly view it more favorably than the last). I’m just not convinced this is the right way for Verizon or Charter to go, and there’s no sign that Charter is even interested.