Charter Communications (NASDAQ: CHTR) made it official that it will acquire Time Warner Cable (NYSE: TWC) for $56.7 billion in cash and stock, a deal that will immediately enhance its fiber reach and Ethernet capabilities for business and wholesale carrier customers.
The cable MSO also announced that it will move forward with its earlier $10.4 billion agreement to purchase Bright House Networks. Upon completion, the combined "New Charter" will have 23.9 million customers in 41 states, becoming the second biggest cable company next to Comcast.
By acquiring TWC, Charter will increase its total fiber miles and on-net building connections. Today, Charter has a total of 65,000 miles and 13,800 buildings connected to its fiber network.
With the acquisition of Time Warner Cable, Charter will gain 150,000 miles of fiber and 75,000 buildings connected to its fiber network. In addition to its own network, TWC has established 130 External Network-to-Network Interface (E-NNI) agreements with 25 other service providers. This enhanced reach will allow Charter to potentially reach into larger business accounts in more U.S. markets.
Earlier, TWC also strengthened its retail and wholesale Ethernet capabilities when it purchased DukeNet, a regional fiber and Ethernet provider. That deal gave the MSO an 8,700-mile regional fiber-based network that currently provides services to a mix of business and wholesale wireless backhaul customers, particularly wireless operators, in North Carolina and South Carolina, as well as five other states in the Southeast.
Having a greater set of fiber miles and on-net buildings will enable Charter to gain a larger share in the Ethernet market. According to Vertical Systems Group's 2014 Cable MSO Ethernet Leaderboard, Time Warner Cable retained the No. 1 spot, while Charter was listed at fourth place.
Rosemary Cochran, principal of VSG, told FierceTelecom in an e-mail that besides Time Warner Cable, "Bright House adds share" to Charter's Ethernet footprint.
What Charter can also bring to Time Warner Cable's customers is Layer-3 VPN services. By offering Layer-3 VPN, the combined company will be able to appeal to larger businesses that have typically turned to incumbent providers like AT&T (NYSE: T) and Verizon (NYSE: VZ) for such capabilities.
"Both Charter and Time Warner Cable are heading up market–targeting ILEC customers, larger networks," Cochran wrote. "Charter also offers IP VPNs."
No less important is Charter's on-again Bright House deal. By acquiring Bright House, Charter would gain new markets in California, Florida, Alabama, Indiana and Michigan. Having a broader geographic and fiber network footprint means that the combined entity can address both larger markets and even Tier 2 and Tier 3 markets that Charter traditionally serves.
Bright House currently has more than 135,000 business customers, a figure that it said grew 11 percent in 2014. For the year 2014, Bright House's overall business revenue grew by 19 percent.
Cable operators overall continue to be aggressive in expanding their fiber network footprints, a phenomenon that's driving up their business service revenues every quarter.
As a result of their aggressive fiber push, Charter and Time Warner Cable have been able to ramp their business service revenues. Both cable MSOs reported $269 million and $781 million in their first-quarter business revenues, respectively.
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