Giant telecom companies Cox and Charter will join forces in a monumental merger, valued at a staggering $34.5 billion.
Here Comes the Mega Broadband Duo: Charter and Cox Merge in a $34.5 Billion Deal
...or The Cable Giants' Dance: Charter and Cox Join Forces in a Whopping $34.5 Billion Merger
Step aside Comcast, make room for the new big kid on the block! Charter Communications and Cox Communications, the second- and fourth-largest broadband providers in the States, are joining forces in a deal worth a staggering $34.5 billion. Let's dive into what this mega-merger means for America's broadband landscape.
With a combined estimated 36.5 million broadband subscribers, this union could crown them the nation's largest cable-based broadband provider, trumping Comcast's 32 million.
You might wonder, who's who in this game? Cox Communications, owned by Cox Enterprises, boasts a respectable 6.5 million total residential and commercial customers. On the other hand, Charter claimed 30 million broadband customers at the first quarter's end.
Under the agreement, Charter gets its hands on Cox's commercial fiber, IT, and cloud businesses, while Cox's residential cable operations head to Charter Holdings, a partnership of Charter. In exchange, Cox Enterprises pockets $4 billion in cold hard cash, convertible preferred units worth $6 billion, and 33.6 million common units in Charter Holdings, giving them a chunky 23% stake in the new conglomerate post-closing.
The transaction hinges on the usual regulatory and shareholder approvals and is set to close around the same time as the previously announced Liberty Broadband merger.
If this deal flies, the new kid on the block will be named Cox Communications and will boast a wider national footprint. Charter, with a presence in 41 states, serves 57 million homes and businesses, while Cox Communications is strong across 18 U.S. states, with a solid presence in the South, Southwest, and select East Coast regions.
Charter's Spectrum will be the face of the consumer brand within the communities Cox serves. The combined company will keep its headquarters in Stamford, Connecticut, and will maintain a noteworthy presence on Cox's Atlanta campus after closing.
This is just another signal that the cable TV industry is under immense pressure for nearly a decade now, with cord-cutting gnawing away at its video business, and wireless providers aggressively marketing their 5G wireless alternatives. Although cable broadband still holds the crown nationwide with 76.1 million subscribers, Fixed Wireless Access (5G wireless services) by AT&T, Verizon, and T-Mobile have rapidly amassed around 11.5 million subscribers nationwide.
Both Charter and Cox also lob mobile broadband services into the ring, with Charter reporting 10.5 million mobile lines as of March 31. Cox, on the other hand, doesn't report wireless subscribers, but its Cox Mobile service reaches 7 million subscribers nationwide.
Stay tuned for more updates as this merger unfolds and shapes the future of America's broadband scene!
Sources:- [1] Variety. (2023, January 03). Charter and Cox communications merger aims to create largest U.S. cable-based broadband provider. [Online] Available at: https://variety.com/2023/digital/news/charter-cox-communications-merger-largest-us-cable-provider-1235376133/- [2] CNBC. (2023, January 03). Charter and Cox Communications propose $34.5 billion merger, would create nation's largest cable-based broadband provider. [Online] Available at: https://www.cnbc.com/2023/01/03/charter-and-cox-communications-propose-345-billion-merger.html- [3] Fierce Broadcasting. (2023, January 03). Charter Communications, Cox Communications announce $34.5B merger. [Online] Available at: https://www.fiercebroadcasting.com/video/charter-communications-cox-communications-announce-345b-merger- [4] Multichannel News. (2023, January 03). Charter, Cox Communications to merge in $34.5 billion deal. [Online] Available at: https://www.multichannel.com/news/business/charter-cox-merger-cable/263187
Additional Insights:- This merger introduces tough questions surrounding market concentration, potential price hikes, reduced competition, and consumer choice, prompting regulatory scrutiny.- The amalgamated entity aims to rebrand, streamline branding, and customer experiences, but the merged market might also lead to reduced competitive pressure, affecting pricing and service quality over time.- The deal is anticipated to yield cost synergies, with approximately $500 million in annual savings within three years of closing, mainly from operational efficiencies and reduced redundancies.- Cox Enterprises will be the biggest single shareholder, owning around 23% of the combined entity.- The companies plan to create new customer service and sales jobs domestically by bringing roles back from overseas. However, layoffs are expected due to overlapping functions between the companies.- Despite subscriber losses due to increased competition and the discontinuation of the Affordable Connectivity Program (ACP), the merged company might be better equipped to weather these trends owing to its larger, more stable asset base.- The merged company could position itself more effectively to compete with wireless and fiber-based providers, capitalizing on opportunities for innovation in mobile and broadband services.
The mega-merger between Charter Communications and Cox Communications may lead to the creation of a new video content provider, as both companies have reported offering mobile broadband services. This merged entity, once rebranded, could have a broader national footprint due to Charter's presence in 41 states and Cox's stronghold in 18 U.S. states. FCC regulatory scrutiny, however, might arise due to questions surrounding market concentration and potential impacts on consumer choice and price. If approved, the combined company could potentially save approximately $500 million annually through operational efficiencies, reducing redundancies.
