The wave of consolidation about to sweep America’s cable industry in 2014 is practically inevitable. The only real question is who ends up buying whom.
The wave of consolidation about to sweep America’s cable industry in 2014 is practically inevitable. The only real question is who ends up buying whom.
At the moment, the highly unpopular Time Warner Cable remains the most likely initial target. There will be much fuss about how such deals will be financed and structured. But ultimately, the outcome of negotiations will come down to the whims of big egos that have dominated the industry for the last six decades.
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The chart below from Macquarie Equities analyst Amy Yong illustrates the tangled web of personalities, which in a way reflects the highly unusual structure of the industry (a fragmented group of regional pseudo-monopolies). As Yong points out, the three companies most likely to emerge with all or part of Time Warner Cable are all controlled by family dynasties, which “could create uncertainty as the quest for kingdom-ship continues,” she says.
The current frontrunner for taking over Time Warner Cable is Charter Communications, which is expected to lob a formal bid early in the New Year. The company is indirectly controlled by Coloradan billionaire John Malone through his Liberty Media investment vehicle. Easily the biggest player in the industry, Comcast $CMCSA is also sniffing around. It has been controlled by the Roberts family since 1963. The final contender for a piece of Time Warner Cable is Cablevision, the upstate New York-based provider controlled by the Dolan family (whose patriarch, the octogenarian billionaire Chuck Dolan, also founded HBO) since 1973.
As the chart indicates, these families have crossed swords on numerous occasions before, in both friendly and bitter transactions. So expect age-old rivalries to play as big a role in determining what happens in the industry as hard business sense.
