Comcast/TWC Reveal Plan To Hand Over 4 Million Customers To Charter

As expected, Comcast and Time Warner Cable confirmed this morning that, through a combination of customer swaps and spin-off, shed themselves of around 4 million customers who will land, at least in part, in the lap of Charter Communications.

There are three aspects to the deal:

1. Charter gets 1.4 million TWC customers.

Charter will pay TWC approximately $7.3 billion for around 1.4 million of TWC’s current pay-TV customers. These customers will primarily be in Ohio, Kentucky, Wisconsin, Indiana, and Alabama.

2. Charter and TWC trade 1.6 million customers.

TWC and Charter will each shuffle around 1.6 million customers. The result will be a zero net gain of users for the parties, but will lead to more geographically contiguous service, with Charter shedding itself of business in California, New England, Tennessee, Georgia, North Carolina, Texas, Oregon, Washington, and Virginia. The map at the bottom of this post shows what Charter’s new footprint would look like.

3. Comcast to spin off customers into new company partially owned by Charter.

Comcast will spin off 2.5 million customers into a company — dubbed SpinCo for the moment — in which Charter will have a 33% stake. SpinCo (or whatever it ends up being called) would serve customers in Michigan, Minnesota, Indiana, Alabama, Eastern Tennessee, Kentucky, and Wisconsin. Between this and the TWC divestitures, Charter would then control a sizable chunk of the Midwest cable market.

Comcast and TWC are hoping that this plan will satisfy regulators reviewing the massive merger that would make the nation’s largest pay-TV and Internet provider even larger. It would also remove the second-largest cable TV provider from the market, leaving a huge gap between Comcast, which would have around 30 million customers, and Charter, which would become the #2 terrestrial provider with around 5.7 million full customers, plus the 33% stake in the 2.5 million SpinCo subscribers.

Today’s announcement is unlikely to quiet voices of opposition to the merger as it does nothing to increase competition in the cable marketplace — if anything, the swap of 1.6 million customers would only give both a merged Comcast/TWC and Charter a higher level of concentration in the markets they serve.

Below is a map, from the Comcast announcement, showing how Charter’s coverage would be clustered in the Great Lakes and Midwestern region of the country:

by Chris Morran via Consumerist