Charter and Cox announced a definitive agreement to combine their businesses, potentially creating a multiple system operator (MSO) Behemoth.
The proposed transaction values Cox at $34.5bn, which includes the assumption of approximately $12bn of debt at closing. Once the deal is complete, Cox Enterprises will own a 23% stake in the combined company, which would pass 69.5 million total addresses, count 37.6 million total customers, and boast annual revenues of $68.2bn dollars.
Upon completion of the merger, the organisation will adopt ‘Cox Communications’ as its official corporate designation, while the ‘Spectrum’ brand will continue to represent consumer-facing operations throughout the combined Charter and Cox markets. Charter intends to finalise the acquisition of Cox in conjunction with its concurrent purchase of Liberty Broadband.
Cox’s transition to a fibre-rich network, and the extent of mid-split upgrades to its hybrid fibre-coaxial (HFC) infrastructure, remain a mystery. However, the company is over three years into its enhancement initiative. Charter is absorbing a network with the capacity to meet the contemporary, high-bandwidth requirements of the majority of households.
The combined company will have significant runway for its mobile virtual network operator (MVNO). Since Cox was several years behind Comcast and Charter in getting its mobile operation off the ground – thanks in part to a long-running legal morass with T-Mobile when Cox switched MVNO network partners (to Verizon) – Cox’s mobile play is under-penetrated at approximately 200,000 total mobile lines. Charter’s free line convergence incentives will remedy that, and having the same mobile network partner should smooth the transition.
Assuming Charter and Cox comply with the Trump administration’s stance against corporate diversity, equity, and inclusion (DEI) initiatives, regulatory obstacles should be minimal. The need to make DEI concessions was underscored by the swift regulatory approval of Verizon’s acquisition of Frontier, which coincided with the announcement of the Charter-Cox deal and occurred one day after Verizon committed to discontinuing its DEI practices.
Another advantage, in terms of regulatory scrutiny, is Charter’s history of maintaining domestic jobs. The company has been emphasising this point for some time, and the press materials for the deal suggest this commitment will continue. Although few large mergers result in net job creation after integration and the elimination of redundancies, Charter and Cox will likely assert that the merger could repatriate some jobs that Cox had previously offshored. This argument may resonate with current regulatory leaders, especially if it provides justification to overlook concerns raised by unions and public interest groups.
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