Charter Communications Pins Hopes on $20B Comcast Deal - Analyst Blog

Charter Communications, Inc.'s (CHTR) agreement to take over cable TV customers from Comcast Corporation (CMCSA) should significantly benefit the company over the long term.

In Apr 2014, Charter Communications and Comcast had reached a strategic cable TV agreement. Last month, Comcast cut a deal with Time Warner Cable Inc. (TWC) to acquire the latter. The merged entity of Comcast and Time Warner Cable will have around 33 million pay-TV subscribers. In order to avoid antitrust restriction, C

omcast has decided to divest around 3.9 million Time Warner Cable video subscribers to Charter Communications to maintain its total market share at 30% of the U.S. pay-TV industry. The total deal size stands at approximately $20 billion.

We believe this deal will benefit Charter Communications significantly as the company will achieve necessary scale to sustain itself in the intensely competitive U.S. pay-TV market.

Unlike most of the cable TV operators, Charter Communications has successfully improved its Internet and telephony subscribers churn rate year over year in the third quarter. Its average revenue per user also increased 2% year over year.

On the downside, online video streaming service providers such as Netflix Inc., Hulu.com, YouTube etc., have become a severe threat to cable TV operators. Online providers offer a cheap source of TV programming unless a customer is eager to view real-time programs like sporting events. This business model is gaining momentum, especially in volatile economic conditions.

Charter Communications currently has a Zacks Rank #3 (Hold).

Key Pick from the Sector

A better-ranked stock worth considering in this sector is Liberty Global plc (LBTYA) with a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
COMCAST CORP A (CMCSA): Free Stock Analysis Report
 
CHARTER COMM-A (CHTR): Free Stock Analysis Report
 
LIBERTY GLBL-A (LBTYA): Free Stock Analysis Report
 
TIME WARNER CAB (TWC): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research