ComCast announced Thursday that it had bought Time Warner Cable for an agreed $45 billion. This move combined two of the biggest cable companies in the United States. Once the deal has been approved, this new alliance will become the country?s biggest provider of Internet connections and television channels. Their services reach roughly one in three homes in the U.S.
Consolidation to Help Comcast Gain Competitive Edge
Analysts view this consolidation as a way for Comcast to gain an edge over its competitors such as DirecTV, AT&T, and Netflix. Founder of investment advisory firm Vertere Group Tim Hanlon said that it is no longer about TV, but more on providing multiple services that flow out from it such as Internet, home security, and phone.
Merge to Take Effect by the End of 2014
Owners of Time Warner Cable will be offered 2.875 shares of Comcast for every share they own. This will make Time Warner Cable at $158.82 per share. The merging of these two companies could take effect by the end of 2014. However, regulators are more concerned on its impact to the consumers. ComCast responded to this issue by preparing to divest 3 million subscribers, but still having 30 million subscribers.
Time Warner Cable is the second largest cable television provider in the United States. With 11 million subscribers, Charter offered to buy the company for about $130 per share. Time Warner Cable called it grossly inadequate and asked for $160 per share, which was close to what ComCast had offered at $158.82 per share.
The said deal will leave Comcast with more leverage over the television market in the U.S, as well as the broadband Internet and phone services. Comcast is known to have about 23 million subscribers.
More Subscribers Require Better Services
While cable providers have poor reputations in general, Comcast was able to deliver and received incredibly high marks for its set ? top boxes and next generation software. Time Warner Cable, on the other hand, had an industry low score in the American Customer Satisfaction Index last spring. With this recent merging announcement, Comcast can improve the performance of Time Warner Cable.