Charter reaches out to Time Warner Cable over potential merger

Top executives close to US cable operator Charter Communications Inc have started to reach out to management at Time Warner Cable Inc (TWC) to discuss a possible merger, The Wall Street Journal yesterday reported, citing people familiar with the matter.

John Malone, chairman, Liberty Broadband (L) called called TWC CEO Rob Marcus to suggest pursuing afriendly deal

The move comes a few days after TWC and Comcast Corp abandoned their $45.2-billion merger over opposition from consumers and the federal regulator. (See: Comcast scraps merger agreement with Time Warner Cable)

The talks also come a year after TWC rejected Charter's unsolicited approaches and instead opted for a merger with Comcast.

John Malone, chairman of Charter's biggest shareholder Liberty Broadband Corp called TWC 's CEO, Rob Marcus "in recent days" to express Charter's interest in pursuing friendly deal talks, the report said.

In January last year, Charter had offered to buy TWC for about $61 billion, in a move aimed at merging the No 4 and No 2 cable companies respectively in the US.

TWC promptly rejected the offer, terming it "grossly inadequate proposal."

Malone, known as ''The King of Cable'', built a small Denver cable company into the into the largest cable system in the 1980s. Commentators say Malone is looking to emerge as the king of consolidation in the same industry once again.

If the two do work out a deal, the merged entities would have around 16 million video subscribers, after Comcast's 22 million subscribers and satellite provider DirecTV's 20 million.

Malone, 72, wants cable companies to grow larger to allow them to take on content owners such as Walt Disney, Twenty-First Century Fox Inc and others, who are increasingly squeezing their cable and satellite rivals for higher fees at the expense of their margins.

Analysts this time expect Charter to make an opening bid that could be lower than around $140 to $145 per TWC share that the market expects. Comcast had in mid-February offered to pay TWC $158.82 per share, a premium of around 7 per cent to TWCs' 12 February closing price of $135.31.

TWC closed on the weekend at $157.25 giving it a market cap of $44.4 billion.

With more than 15 million customers, TWC offers data, video, and voice services to businesses of all sizes, cell tower backhaul services to wireless carriers and, through its NaviSite subsidiary, enterprise-class hosting, managed application, messaging and cloud services.

TWC owns cable systems in New York City, Southern California, Texas, the Carolinas, Ohio, and Wisconsin.

It posted net income of $2 billion last year on revenues of $22.8 billion.

Stamford, Connecticut-based Charter offers cable video programming services, including basic and digital video, premium channels, on-demand, pay-per-view, high definition television, and digital video recorder services.

It has 4.2 million residential video customers; around 4.8 million residential Internet customers, approximately 2.4 million residential voice service customers, and around 619,000 small- and medium-sized commercial customers

It has a market cap of $21 billion and posted a net loss of loss of $169 million last year on revenues of $9.1 billion.