Is Time Warner Cable Inc. (TWC) Up for Sale?

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The Wall Street Journal recently reported that cable TV operator Charter Communications Inc. (CHTRSnapshot Report) is striving to reach an agreement with several banks to raise funds in order to acquire Time Warner Cable Inc. (TWCAnalyst Report).

This announcement has reignited the six-month old rumor in the cable TV industry. Earlier this month, Reuter also reported that Charter Communications is considering another bid for Time Warner Cable before the end of 2013.

The news of a proposed merger between Charter Communications and Time Warner Cable first surfaced after Liberty Media Corp. (LMCAAnalyst Report) acquired a 27.3% stake in Charter Communications for a total consideration of $2.617 billion. Liberty Media is aggressively pursuing the idea of Charter Communications acquiring a major cable TV operator in the U.S., such as Time Warner Cable.

Nevertheless, Time Warner Cable rejected the earlier acquisition attempt by Charter Communications. Earlier this year, Charter Communications acquired Cablevision Systems Corp.’s (CVCSnapshot Report) western U.S. cable systems unit, Optimum West, for around $1.6 billion in cash.

 A recent analysis by Leichtman Research Group Inc. revealed that the cable TV operators in the U.S. are gradually losing hold in the pay-TV market. Internal dynamics of the pay-TV market is slowly shifting toward fiber-based video offerings of large telecom and satellite TV operators. Video offering is the core business area of the cable TV operators, which is slipping out of their hands.

Leichtman also stated that the top nine U.S. cable TV operators had a net loss of 600,643 pay-TV customers in the third quarter of 2013. This was cable TV industry’s biggest net loss after the third quarter of 2010. Time Warner Cable lost a whopping 306,000 residential pay-TV subscribers in the said quarter.

At this juncture, consolidation in the cable TV industry may become a logical conclusion. The U.S. telecom sector is witnessing massive consolidation drive in order to attain sufficient spectrums and economies of scale.

Meanwhile, Time Warner Cable recently stated that before finalizing any deal, the company will thoroughly evaluate whether the deal will add sufficient value to its investors. Currently, both Time Warner Cable and Charter Communications have a Zacks Rank #3 (Hold).

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