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Charter Communications (CHTR) is the fourth-biggest U.S. cable company. It just announced plans to buy Time Warner Cable (TWC), the second-biggest cable firm, for $55 billion in cash and stock.
Meanwhile, Charter had already agreed to buy Bright House Networks for $10.4 billion. The combined company will have roughly 23 million customers, assuming everything goes off without a hitch.
That would put it just behind Comcast Corp. (CMCSA), which has 27 million customers. Comcast had previously outbid Charter for Time Warner, but regulators gave Charter a second chance by nixing the Comcast transaction.
|Charter Communications has bid for Time Warner Cable.|
As if that wasn’t enough, French firm Altice SA has been out there shopping, too. It was in the running for Time Warner. But it ultimately settled for a $9.1 billion deal to buy Suddenlink Communications, the seventh-largest cable provider.
What’s creating all this cable chaos? Massive industry upheaval!
Companies like Netflix (NFLX) and Apple (AAPL) are poaching customers with products and services that let them watch shows on their own schedules, via broadband Internet connections that deliver streaming video. At the same time, cable providers are facing tougher negotiations with TV networks over the cost of delivering their bundles of channels each month.
These deals are designed to help with both problems. They give them more financial heft to expand their broadband Internet businesses, and add to their Internet service provider customer counts. Plus, they give them more heft in those content negotiations with TV networks.
As an investor, you can make a nice chunk of change from deals in the media space. The price offered by Charter was a further 14% premium to where TWC closed on Friday, and the stock had already more than doubled in the past couple of years.
|“As a cable or Internet customer, I doubt they’ll do much to help keep monthly bills down.”|
But as a cable or Internet customer, I doubt they’ll do much to help keep monthly bills down — or fix the industry’s lousy customer service. That’s why many Americans are just “cutting the cord” and abandoning traditional cable companies in the first place.
So what do you think of the cable chaos? Are these deals transforming the media landscape in an important, lasting way? Or are they just desperate rear-guard actions from a declining industry? Have you been investing in the media stocks, or do you have a favorite name that should prosper in this environment? Tell me about it over at the Money and Markets website if you have a minute.
|Our Readers Speak|
I hope you enjoyed the long weekend, and had the opportunity to spend time with friends and family – as well as remember the reasons behind the holiday in the first place. Taking a look at the website, I see lots of questions and comments on the subject of Friday’s column … natural gas.
Reader Gaeton offered a big-picture perspective on gas and coal, saying: “The future for nat gas looks bright. First, at $2.50, nat gas is selling for less than drilling cost. This will only lead to less production and higher prices. Secondly, the LNG exporting industry is due to start in 2016 which will push prices higher.
“That said I, would not be too negative on coal. It is dead money for now but could represent a tremendous opportunity. Higher gas prices only mean higher cost to produce energy. At $5-$6 gas, it suddenly makes coal a cheaper alternative even with scrubbers that will clean up its carbon footprint. Coal is not going away. It is a major source of energy not only in this country, but worldwide.”
Reader Ron S. said natural gas could see yet another surge in demand if more of the motor vehicle industry switches over to the fuel. His take: “The single-biggest growth opportunity for natural gas is with vehicles. Not only is the raw commodity equivalent to gasoline (same BTU heat value) and sells for less than $0.40/gallon, but it is much cleaner than gasoline or diesel.
“Although over 18 million NGVs exist throughout the world, the U.S. is just beginning to catch up with major fleets purchasing dedicated natural gas vehicles like AT&T with 8,000, Frito-Lay with 1,800 and UPS purchasing another 1,400 all in the last year.
“Sixty percent of all of our refuse trucks and 30% of all our transit buses are built with dedicated natural gas engines. Since the U.S. has more natural gas than any other country in the world, and 63% of our homes have a natural gas line coming into them already, it is just a matter of time before natural gas starts replacing foreign oil.”
As for what to do about it, Reader M. highlighted a possible investment play: “You state more natural gas is being used. Not wanting the risk of the price of NG, then buy the pipelines who charge for the amount of NG transported regardless of price. Kinder Morgan (KMI) is the best and financially secure pipeline company that pays a huge dividend.”
Reader Bob also pointed out another one: “The Alerian MLP ETF (AMLP). It has a great dividend and is a play on gas.”
Thanks for the comments, and for the investment ideas. I have recommended AMLP before in one of my services, and I like what I see at KMI as well. Meanwhile, as Reader Ron S. noted, demand for natural gas-powered vehicles should continue to climb. But the focus will be on larger trucks, buses, fleet vehicles, and the like for the foreseeable future.
If you haven’t already weighed in, but would like to, be sure to stop by the website here.
|Other Developments of the Day|
Durable goods orders dropped 0.5% in April, but a core measure of business spending embedded in the report climbed 1%. That beat expectations and somewhat eased investor concerns about the state of the U.S. economy.
Will the Federal Reserve raise interest rates soon? What will that mean for the value of the U.S. dollar? What would foreign central banks like to see happen? This Financial Times story covers some of those topics. I’ve made my views clear recently about that as well. But I should acknowledge that the dollar weakness we saw in March and April is partially reversing now.
Nasty spring weather is continuing in the central U.S., with several inches of rain and tornadoes causing widespread flooding, school closures, and multiple deaths in Houston, elsewhere in Texas and Oklahoma.
China and the U.S. keep testing each other’s mettle in the South China Sea. China is continuing to convert reefs in the region into island bases … while the U.S. is increasing naval and air surveillance of those operations.
Is this a new Cold War, or one that threatens to “go hot”? I’d be interested in your take, which you can share at the website. Feel free to weigh in on any of the other stories I’ve highlighted as well.
Until next time,