In preparation for its pending buyout of Time Warner Cable, Comcast has agreed to transfer a portion of its post-merger subscribers to Charter Communications. The deal, which was rumored last week and confirmed this morning, will see roughly 1.4 million Time Warner Cable subscribers sold to Charter, expanding its 4.4 million video customer base to around 5.7 million, according to a statement. This addition would make Charter the second-largest cable operator in the US, though the new Comcast's 30 million video subscribers would still put its numbers to shame. In addition to this straightforward sale, the companies will also be swapping and spinning off several million more customers. Comcast and Charter will trade 1.6 million subscribers in different markets, a decision that they say will let them operate more efficiently.
In a more complicated move, the two companies will create a third entity to handle about 2.5 million more Comcast customers. The new group, called SpinCo, will be publicly traded, with a Charter holding company controlling 33 percent of it. The remaining 67 percent will be in the hands of Comcast shareholders, but Comcast itself will have no connection to the company, and SpinCo's actual operations will be managed by Charter. Exact terms of the overall deal haven't been disclosed, but Bloomberg previously reported that Charter would pay around $20 million for the customers and a stake in SpinCo.
When Comcast first announced its plans to acquire Time Warner Cable, it promised to keep its share of the cable market under 30 percent by divesting around 3 million customers. FCC rules once barred any cable company from owning more than 30 percent of US subscribers, reasoning that anything larger could give a company quasi-monopolistic power in negotiating TV programming deals. In 2009, a DC court threw out that rule, but Comcast is still adhering to the cap in order to allay regulators' fears about its overwhelming size. Charter, for its part, has made multiple failed attempts to acquire Time Warner Cable, and this deal gives it a fraction of those customers — even if Comcast is still ending up with most of the TWC pot.