Comcast agrees to divest customers to Charter

Comcast has agreed to transfer 3.9 million cable TV customers to Charter Communications, in an attempt to secure regulatory approval for its proposed takeover of Time Warner Cable. If the deal gets approval, Charter would acquire 1.4 million TWC customers directly, growing its base by over a quarter to 5.7 million and making it the second-largest cable operator in the US. Another 2.5 million Comcast customers will be spun off into a new company 33 percent owned by Charter and to which Charter will provide management services. Comcast will spin off the other 67 percent in the new company to its own shareholders. 

In addition, Comcast and Charter have agreed to swap 1.6 million customers each in order to better fill in their network footprints. Charter expects to fund the purchase with debt, giving it net debt of 5x EBITDA after the transactions. Comcast said the deals are valued in total at 7.125x estimated 2014 EBITDA, and Charter will make additional payments to Comcast over time as tax benefits from the asset sale are realized. 

The agreement would ensure that Comcast and TWC's share of the US TV market does not exceed 30 percent after their merger. Comcast would still have almost 30 million customers, after acquiring around a net 7 million from TWC. Furthermore, the Charter deal is not expected to impact the estimated USD 1.5 billion in operating synergies from the Comcast-TWC merger. In addition to regulatory approval, Charter shareholders must approve the acquisitions.