US telecoms giant Comcast is planning to sell 3.9 million customer subscriptions to rival Charter Communications in an effort to stem fears that its planned merger with Time Warner will create a monopoly.
The firm said that it would conduct three transactions with Charter as part of an effort to reduce its overall share of the US cable subscriber market to below 30 per cent once its proposed $45.2bn megadeal is completed.
Under the terms of the deal, Comcast would first divest 1.4 million of its customers to Charter in areas including Ohio, Wisconsin. Kentucky, Indiana and Alabama.
A second deal, also set to take place following the planned Time Warner acquisition, would see Comcast and Charter swap customers in their current networks to realign their services in certain regions. Comcast said this deal would involve 1.6 million customers, and Charter noted that it would include parts of the West Coast, Southeast, and New England.
A third deal would see both companies investing in a spin-off cable company currently referred to as SpinCo. The new firm would operate as a regional carrier for the Great Lakes states of Minnesota, Michigan, Indiana, and Wisconsin, as well as Alabama, Tennessee, and Kentucky. Comcast said that it would contribute 2.5 million subscribers to the effort and control a 67 per cent stake in the new company.
The deals would reduce the merged Comcast/Time Warner's share of the US cable television market below 30 per cent, while Charter would come out of the deal with 5.7 million customers and the claim to being the second largest US cable operator in the nation behind the Comcast/Time Warner behemoth.
"The transactions announced today will provide Charter with greater scale, growth opportunities and improved geographical rationalization of our cable systems, which in turn will drive value for shareholders and more effective customer service," Charter CEO Tom Rutledge said of the deal.
"And through our meaningful ownership in and board representation at SpinCo, we can help it achieve similar market share growth in the markets it serves."
Comcast, meanwhile, hopes that the divestiture of customers will help to sway regulators who are wary of its proposed deal with Time Warner. The company previously noted that offloading some of its more than 30 million customers would be a part of any merger with Time Warner Cable.
Critics of the deal, including Netflix, have argued that by acquiring Time Warner, Comcast would be able to monopolize the market, allowing it to extract higher fees and cut service quality for customers who lack any other options. ®