Tuesday, January 23, 2018
Business

Verizon reportedly in talks to merge with Charter, America's second-biggest cable company

Roughly a year after swallowing up Time Warner Cable, Charter Communications could merge with yet another massive broadband and TV provider: Verizon.

The telecommunications giant is reportedly exploring a combination with Charter, the nation's second-largest cable company, according to the Wall Street Journal.

A deal between the two could create a massive company controlling access to home broadband, cable TV and mobile voice and data services, accelerating what some analysts describe as a "mad scramble" of consolidation in the communications industry.

"These companies are chomping at the bit to gobble each other up and control Internet transmission across the country," said Gene Kimmelman, a former antitrust official at the Justice Department and president of the consumer advocacy group Public Knowledge.

Verizon serves 114 million cellphone subscribers, 4.6 million TV customers and 7 million Internet subscribers; Charter has 17 million TV customers and 21 million Internet subscribers. Together, the two companies' high-speed Internet businesses would add up to more than Comcast's 25 million broadband customers; at 21.6 million, their combined base of TV customers would be roughly on par with Comcast's. Both Verizon and Charter declined to comment.

In the Tampa Bay area, Charter has more than a million customers under its Spectrum brand. Verizon sold its landline phone, TV and Internet business to Frontier Communications last year. About 2.3 million homes and businesses had Verizon's service before the Frontier acquisition.

Under pressure from rivals in the wireless industry such as AT&T and T-Mobile, Verizon has sought to expand into adjacent industries by buying up companies traditionally associated with Internet content, such as AOL and Yahoo. Cable companies are also trying to shore up their businesses as consumers, fed up with rising bills and attracted to online alternatives, increasingly cancel their service.

"Verizon faces challenges in its wireless future and a disappointing early experience in providing online video which might have it searching for a large deal that can provide a larger pivot in its strategy," said Walt Piecyk, an analyst at BTIG. "It's unlikely that Charter will be the only company that Verizon talks with in 2017."

President Donald Trump has expressed skepticism of large media mergers, taking aim on the campaign trail at AT&T's proposed acquisition of Time Warner and Comcast's 2011 acquisition of NBCUniversal. But some say he is unlikely to block any deals.

"No one on Wall Street actually believes he's going to act on ⅛his words⅜," said one industry analyst, referring to other campaign stances Trump has since softened, such as his vow to prosecute Hillary Clinton. The analyst spoke on condition of anonymity in order to speak more freely.

What's more, some of Trump's political appointees who might oversee a potential Verizon-Charter deal are seen as amenable to large mergers. Ajit Pai, whom the president named this week as chairman of the Federal Communications Commission, is expected to take a sunnier view of consolidation, said Paul Gallant, an analyst at Cowen & Co., in a research note Monday.

It's less clear what Sen. Jeff Sessions, R-Ala., Trump's nominee for attorney general, thinks about big mergers - although in his confirmation hearing, he did say both that he would have "no hesitation to enforce antitrust law" and that he opposed forcing sweeping conditions on companies to regulate their post-merger activity.

Companies thus face the prospect of a friendlier regulatory environment than during the Obama administration, analysts say, which could help drive a wave of merger announcements in the coming months.

"The industry thinks there's going to be a short window in which lots of deals are going to be allowed," said Blair Levin, a senior fellow at the Brookings Institution who helped draft the FCC's National Broadband Plan in 2009. Turning to an arms race analogy, Levin added, "If an army is competing against an army and one of them gets a navy, suddenly you need a navy. And then you wind up in a situation where every army has a navy and a marine corps and an air force."

Times staff writer William R. Levesque contributed to this report.

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