Cable Operators

Rutledge: Charter Doesn’t Need Acquisitions to Grow

But Maffei Says Deals Could Make MSO More ‘Attractive’ 12/03/2013 12:13 PM Eastern

Charter Communications stock dipped more than 2% ($3.19 each) in early trading Tuesday after CEO Tom Rutledge told CNBC that the cable operator didn’t need acquisitions to grow.

Speculation has swirled around a Charter purchase of Time Warner Cable ever since one of its largest shareholders, John Malone’s Liberty Media, made overtures to the larger cable company in June.  While those overtures were rebuffed, Charter reportedly has assembled about $25 billion in bank financing for the cash portion of a deal that could be valued as much as $70 billion for TWC. No formal offers have been made yet.   

Charter stock was priced at $129.53 in early trading, down 2.4% ($3.19 per share). TWC shares also declined, down 1.7% ($2.31 each) to $134.50 in early trading Dec. 3.

Appearing on CNBC’s “Squawk Box” program Tuesday morning, Rutledge said Charter has the opportunity to grow without buying another company.

“Charter doesn’t need to do any acquisitions to be a successful company,” Rutledge told CNBC.  “…We can grow this business pretty much anywhere where it’s underpenetrated.”

Charter has the lowest video penetration in the industry, at about 34% of homes passed. It also brings up the rear in terms of operating cash flow generation per home passed – at $225 annually compared to Cablevision Systems which leads the industry with about $450 in annual cash flow per home passed.

“Charter is at the very bottom; so therefore it has the most runway,” Rutledge said.

Liberty Media CEO Gregg Maffei, appearing on the same program, agreed that Charter has room for organic growth, adding that acquisitions “make an attractive Charter even more attractive.”

While Maffei aid a number of other companies could be an attractive fit for Charter, he added that “Time Warner Cable is relatively unique because it is not controlled by a family, it’s large and they have a management transition going on. All those factors have led to a lot of speculation about a transaction.”

Time Warner Cable chairman and CEO Glenn Britt is slated to retire at the end of the year and will be replaced by current chief operating officer Rob Marcus.

September