Time Warner Cable Rejects Charter, Wants Higher Merger Price

Telecom acquisition would give company more power over programming.

Charter Communications announced its bid for Time Warner Cable Monday, priced at $132.50 per share.
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Time Warner Cable rejected an acquisition bid from Charter Communications because it was too low, but did not rule out the possibility of a price that was in the best interests of its shareholders, leaving open the possibility of a future merger in the already heavily consolidated telecom sector.

Charter is the largest shareholder of Liberty Media, which is led by media mogul John Malone. The possibility of Time Warner Cable being acquired by another large telecom company could give the resulting company broader control of subscriber fees and programming.

The company publicly announced its bid for Time Warner Cable Monday, priced at $132.50 per share. That public announcement turned off Time Warner Cable chief executive officer Rob Marcus, who rejected the bid that same day because it was "grossly inadequate," according to a press release.

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"Our job above all is to act in the best interests of our shareholders. We are not seeking to sell the company, but consistent with what we have always said about maximizing shareholder value," Marcus said. "On December 27 we made it clear to Charter that our board is open to a transaction with Charter at a price of $160 per TWC share."

Comcast has also been seen as a candidate to purchase Time Warner Cable. Time Warner Cable is a standalone cable and Internet provider, which does not include the media properties of the former part of Time Warner, which spun off from AOL in 2009. Cable markets are losing subscribers as media viewing on the Internet grows, but Time Warner has been losing Internet subscribers as well, which is a growth area for many providers.

Both the Justice Department and the Federal Communications Commission would review the merger. The DOJ would be looking at antitrust concerns while the FCC would be concerned with public interest concerns, including whether a merger would improve efficiency and consumer services enough to be worth a potential negative impact on market competition.

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A merger between large telecom companies should elicit strong scrutiny from regulators because it would remove a competitor from a cable market in which companies have already divided regions of the country and "do not compete against each other by choice," says Chris Lewis, vice president of government affairs at Public Knowledge, a consumer advocacy group.

"More consumers would only be able to choose one cable company," Lewis says. "That gives a lot of power to that company over what content a consumer has access to especially in light of the net neutrality rules being struck down."

A federal appeals court ruled Tuesday that Verizon Communications Inc., and other Internet service providers, can operate like premium TV providers by offering priority broadband access to certain websites. The court struck down the FCC's legal authority to enforce net neutrality rules that forbid prioritizing digital traffic.

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