Charter’s Rutledge: Scale Would Boost B2B Business


While consolidation talk over the past few months has centered on how scale helps cable companies beat back high programming costs, Charter Communications CEO Tom Rutledge, speaking at an industry conference last week, offered another reason for certain MSOs to get bigger: expanded business services.

Rutledge, speaking at the Bank of America Merrill Lynch Media, Entertainment & Communications conference in Los Angeles on Sept. 11, said companies too often focus on short-term cost benefits in mergers and acquisitions, adding that those are mostly one-time cost synergies.

“Is there some scale level where it could be transformative and actually change the leverage in the business?” Rutledge asked. “I think there is. There are a variety of things that could be opened up if that were to occur — one is programming leverage, and another is the whole telephone business and the ability to serve national clients, national phone customers that are in multiple locations.”

He said in Charter’s footprint alone, businesses spend about $9.5 billion annually on telecom services. He added that Charter is expected to capture about $800 million of that business this year.

In a research note last week, MoffettNathanson LLC principal and senior analyst Craig Moffett agreed.

“Operators that cover larger territories have a higher probability of being able to target larger, multi-location businesses that would otherwise be in two separate franchise areas and thus not serviceable,” Moffett wrote.

Charter has been at the forefront of consolidation talk in the industry ever since Liberty Media, run by cable legend John Malone, purchased a 27% interest in the MSO in March. In June, Charter and Liberty reportedly made overtures to Time Warner Cable concerning a possible merger, but were rebuff ed. Since then, Charter has apparently hired investment banker Goldman Sachs to investigate possible M&A opportunities.

Rutledge was named CEO of Charter in late 2011 after a long stint as chief operating officer at Cablevision, awhere he was responsible for helping grow the MSO into the most highly penetrated cable operator in the country. At the Merrill Lynch conference, Rutledge said he had kept his eye on Charter for years.

“When I was looking at Charter several years ago before I left Cablevision, I looked at it as an acquisition; I wanted to buy it,” Rutledge said. “That was not to be. So, I actually thought about it — well, I’ll run it. The reason I wanted to run it was the same reason I wanted to buy it — I looked at it as an under-penetrated asset.

“I basically think of the whole cable industry as an under-penetrated asset,” he added.


Charter CEO Tom Rutledge last week said the scale provided by consolidation in the cable industry could enable MSOs to tap new business opportunities.