June 11, 2007]
Merger speculation in cable TV
(St. Louis Post-Dispatch (KRT) Via Thomson Dialog NewsEdge) Jun. 9--Is more cable consolidation coming down the pipe?
One of the industry's biggest players says yes. And that might hit home here in St. Louis.
At a conference Thursday in London, Time Warner Chief Executive Richard Parsons suggested that a new wave of consolidation will shake up cable over the next 18 to 24 months. And that Time Warner Cable, the nation's second-largest provider, probably would be a buyer.
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"The space is going to continue to consolidate," he said. "We want to participate in that consolidation."
Parsons didn't share his shopping list, but some analysts think it includes pieces of local cable heavyweight Charter Communications.
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Both companies have big presences in Dallas/Fort Worth, Los Angeles and the Carolinas, for instance, and clustering in those markets could make economic sense.
That would make Time Warner a logical buyer for big chunks of Charter, Credit Suisse analyst Bryan Kraft wrote in a research note this week, though perhaps not the whole company.
"We could envision parts of Charter being sold to Time Warner Cable and other parts to other cable operators," Kraft wrote.
Consolidation, analysts say, would help big cable providers run more efficiently, and equip them better to compete with the growing threat from telephone companies like AT&T and Verizon that are investing heavily in video.
Another potential buyer of some Charter systems, Kraft noted, would be Suddenlink Communications, privately held by Charter founder Jerry Kent with headquarters on the same street in Town and Country.
The two companies have a history "" last year Suddenlink, then called Cebridge, bought systems from Charter in Virginia and West Virginia that serve about 242,600 subscribers "" and Suddenlink has grown aggressively in recent years.
Suddenlink spokesman Pete Abel wouldn't comment on any specific acquisition targets, but said the company won't be shy if a good opportunity opens up.
"We definitely see ourselves as one of the consolidators," he said.
Of course, it's not at all clear that Charter is in a selling mood. Billionaire Paul Allen owns a controlling stake in the company and he's been quiet on the matter. As for last year's sales, Charter described the systems it gave up as "geographically non-strategic," not part of its core market.
Right now, said spokeswoman Anita Lamont, Charter is focused on "improving the customer experience," and rolling out phone service. As for consolidation talk, she said, that's just part of the business.
"As long as there have been cable companies, there has been speculation about swaps, trades, all kinds of things," Lamont said. "It's the nature of this industry."
Any big sale would have a big impact here. Charter employs about 2,900 people in the region and is one of eight local Fortune 500 companies.
And a full sale of the company probably would fetch a steeper price than in the past. Charter's stock price has more than tripled over the past year, closing Friday at $3.98 a share.
Analysts like the company these days, too.
This week, Kraft upgraded his rating on Charter to "outperform," and Pali Research analyst Richard Greenfield said the company's growth is set to "accelerate notably" over the next year or two, a time period right in line with Parsons' prediction for a new shakeout in the cable business.
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