Charter to Buy Time Warner Cable: Winners and Losers
Charter Communications on Tuesday said it will acquire Time Warner Cable in a deal valued at more than $55 billion. Charter will also buy Bright House Networks, a smaller cable company, for $10.4 billion. The two deals combined will make Charter into the second-largest cable and broadband provider in the U.S., with about 24 million subscribers, behind only Comcast, which has about 27 million subscribers.
WINNERS
Time Warner shareholders: An extra $10 billion over the $45.2 billion Comcast had offered sure makes for a nice payday after the earlier deal got scrapped. “Time Warner Cable has succeeded in extracting a fantastic price for its shareholders, far exceeding our expectations,” Morningstar strategist Michael Hodel wrote Tuesday. Hedge fund managers John Paulson of Paulson & Co. and Chris Hohn of Children’s Investment Fund Management reportedly both had sizable holdings in Time Warner Cable.
Time Warner Cable subscribers: The company’s service is reviled by customers. Charter’s isn’t exactly beloved, either, and subscribers may not see any immediate changes, but Charter promises that the deal will translate into faster broadband for subscribers and more free public Wi-Fi. Whether it actually does or not, the deal seems to spell the end of the Time Warner Cable name. Subscribers won’t miss it.
John Malone: The Liberty Media billionaire finally gets the megadeal he’s been looking for to make Charter Communications into a major industry power. If the deals goes through, the company would become the second-largest cable and broadband provider in the country, with some 24 million total subscribers.
Related: Charter and Time Warner Cable Merger: It’s All About Broadband
LOSERS
Comcast: At least CEO Brian Rogers was graceful about the prospect of a larger competitor. "This deal makes all the sense in the world,” he said in a statement. “I would like to congratulate all the parties."
Television content providers: One rationale for the deal is that the scale of the combined company will afford it more leverage in its negotiations with programmers.
Cable customers and online video watchers? The proposed deal still concerns consumer advocates like those at public interest group Free Press. “The issue of the cable industry's power to harm online video competition, which is what ultimately sank Comcast’s consolidation plans, are very much at play in this deal,” said Derek Turner, research director for Free Press. “Ultimately, this merger is yet another example of the poor incentives Wall Street’s quarterly-result mentality creates. Charter would rather take on an enormous amount of debt to pay a premium for Time Warner Cable than build fiber infrastructure, improve service for its existing customers or bring competition into new communities.”
Number of the Day: $132,900
The cap on Social Security payroll taxes will rise to $132,900 next year, an increase of 3.5 percent. (Earnings up to that level are subject to the Social Security tax.) The increase will affect about 11.6 million workers, Politico reports. Beneficiaries are also getting a boost, with a 2.8 percent cost-of-living increase coming in 2019.
Photo of the Day: Kanye West at the White House
This is 2018: Kanye West visited President Trump at the White House Thursday and made a rambling 10-minute statement that aired on TV news networks. West’s lunch with the president was supposed to focus on clemency, crime in his hometown of Chicago and economic investment in urban areas, but his Oval Office rant veered into the bizarre. And since this is the world we live in, we’ll also point out that West apparently became “the first person to ever publicly say 'mother-f***er' in the Oval Office.”
Trump called Kanye’s monologue “pretty impressive.”
“That was bonkers,” MSNBC’s Ali Velshi said afterward.
Again, this is 2018.
Chart of the Day: GDP Growth Before and After the Tax Bill
President Trump and the rest of the GOP are celebrating the recent burst in economic growth in the wake of the tax cuts, with the president claiming that it’s unprecedented and defies what the experts were predicting just a year ago. But Rex Nutting of MarketWatch points out that elevated growth rates over a few quarters have been seen plenty of times in recent years, and the extra growth generated by the Republican tax cuts was predicted by most economists, including those at the Congressional Budget Office, whose revised projections are shown below.
Are States Ready for the Next Downturn?
The Great Recession hit state budgets hard, but nearly half are now prepared to weather the next modest downturn. Moody’s Analytics says that 23 states have enough reserves to meet budget shortfalls in a moderate economic contraction, up from just 16 last year, Bloomberg reports. Another 10 states are close. The map below shows which states are within 1 percent of their funding needs for their rainy day funds (in green) and which states are falling short.
Chart of the Day: Evolving Price of the F-35
The 2019 National Defense Authorization Act signed in August included 77 F-35 Lightning II jets for the Defense Department, but Congress decided to bump up that number in the defense spending bill finalized this week, for a total of 93 in the next fiscal year – 16 more than requested by the Pentagon. Here’s a look from Forbes at the evolving per unit cost of the stealth jet, which is expected to eventually fall to roughly $80 million when full-rate production begins in the next few years.
