Comcast, Time Warner in talks to sell 5MN subs to Charter
Michelle Clancy | 22-04-2014
As regulators and everyone else contemplates the ramifications of their merger, Comcast and Time Warner Cable are reportedly in talks with Charter Communications to sell off five million subscribers for $20 billion or more.

The Financial Timesis reporting that Comcast and Charter discussions are at an early stage but that they could result in a deal involving between three and five million subscribers.

No 1 cableco Comcast has been expected to agree to divest about three million cable subscribers as part of its $45 billion takeover of No 2 cable MSO Time Warner, by selling the base to another pay-TV company or by selling off the assets into a separate, publicly traded entity.

A source told Reuters a few weeks ago that Comcast has already been fielding "strong interest" from potential buyers and will ask for about $18 billion (valuing each subscriber at $6,000).

That valuation would indicate that the divestitures will be for Tier 1 markets, according to ISI analyst Vijay Jayant, considering that other publicly listed cable companies have valuations between $4,000-$5,000 per subscriber.

"We don't know which markets these are, but if these are contiguous subscribers in smaller markets and not New York for example, I don't know if Comcast can get $6,000 per subscriber," he told Reuters.

Comcast and TWC have around 23 and 11 million subscribers, respectively, for a combined 33-34 million customers. Together they would reach about one in three American households. It's clear that they realise that regulators will be eyeing this one carefully before approving it — Comcast said that it does expect a "thorough, a rigorous, and an appropriately critical government review," but that the shedding of three to five million could assuage regulator antitrust concerns.

Even post-divestiture, with 30-31 million, it would still be a juggernaut in the market. If the deal wins the approval of regulators, AT&T would be the next largest broadband provider, with about 16.5 million customers, followed by Verizon with nine million subscribers. For pay-TV, DirecTV is No 2 with about 20 million subscribers, followed by Verizon FiOS at about 16 million.