Charter Communications, the largest US pay TV provider, on Friday announced plans to merge with family-owned privately-held service provider Cox Communications, expanding its service footprint and creating a chance for growth across internet, mobile and video businesses.
Charter is acquiring Cox’s commercial fiber and managed IT and cloud businesses and Cox Enterprises will contribute the Cox Communications’ residential cable business, including 6.3 million customers, to Charter Holdings, an existing subsidiary partnership of Charter.
The enterprise value of the deal for Cox is $34.5 billion, including $21.9 billion of equity and $12.6 billion of net debt and other obligations Charter will assume. As part of the $21.9 billion purchase consideration, Cox Enterprises will receive includes $4 billion in cash. At close, Cox Enterprises will own approximately 23% of the combined company’s diluted shares outstanding.
Interestingly, within a year of closing, the combined company will forego the Charter moniker and change its name to Cox Communications - but Charter’s Spectrum product branding will continue to be used and become the new consumer-facing brand as it introduces the Charter pricing and packaging strategy in Cox’s service footprint. The operators’ footprints have little to no overlap, and the companies touted them as complementary and providing the ability to better compete at a national level.
Following close, Charter’s Chris Winfrey will continue in his roles as CEO, president and board member. Alex Taylor, chairman and CEO of Cox will become chairman of the combined company’s board, while current Charter Chairman Eric Zinterhofer will transition to lead independent director on Charter’s board.
While bringing greater national scale to the largest US cable operator, it also marks the end of an era for a long-standing provider. The Cox family represents the longest continuous operator in the cable industry, with its first cable franchise purchased in 1962.
“Our family has always believed that investing for the long-term and staying committed to the best interests of our customers, employees and communities is the best recipe for success,” said Taylor in a statement. “In Charter, we’ve found the right partner at the right time and in the right position to take this commitment to a higher level than ever before, delivering an incredible outcome for our customers, employees, suppliers and the local communities we serve.”
Complementary footprint, opportunity from pricing & packaging strategy
The tie-up brings infrastructure assets and an expanded customer base and operations footprint to Charter, which already counts 57.2 million passings and a customer base of 31.4 million, including about 12.2 million residential pay TV customers.
By merging with Cox, it will add 12.3 million passings and the operator’s 6.3 million customers, including 5.9 million internet, 1.7 million video and 200,000 mobile customers, for a combined total customer base of 37.6 million.
One of the initial opportunities it sees is to introduce lower-priced Spectrum offerings within the Cox footprint.
Charter and Cox each have regional operations and their service footprints don’t have much overlap. By merging, Charter said it brings Cox’s “highly clustered” and sunbelt footprint that’s complementary to Charter’s existing network. The companies expect to have enhanced DMA efficiencies in markets like Los Angeles and San Diego, while Cox also brings key new markets such as Las Vegas and Phoenix.
Once the deal is completed it will launch Spectrum-branded products, including Advanced Wi-Fi, Spectrum Mobile with Mobile Speed Boost, the Spectrum TV App, Seamless Entertainment and Xumo, across the Cox service area.
In materials released alongside the announcement, Charter highlighted expectations that introduction of its newer, more flexible pricing and packing service options and bundles to customers in the Cox footprint will drive sales and reduce churn and service interactions. With the new passings and Spectrum brand, Charter anticipates enhancements to its sales, marketing and branding capabilities against national competitors.
On a call for investors Friday morning, company executives disclosed that in 2024 Cox generated $13.1 billion of revenue and $5.4 billion of transaction adjusted EBITDA. The companies expect to realize $500 million of annual run rate deal cost synergies within three years of the transaction closing, primarily from procurement and overhead savings. They also expect to create revenue and operating cost synergies over time, or capex savings, from applying Charters operating strategy – and execs believe “both of those benefits will be significant.”
Charter’s Winfrey on the call Friday said that the most material opportunity is the ability to drive mobile offerings within the Cox footprint – where mobile in recent years has emerged as a growth business for Charter (it currently has 10.4 million mobile lines) – but one where it faces plenty of competition and where Cox was a bit later than others to join the game and is underpenetrated.
He noted mobile offerings also tie into internet, reiterating the biggest initial opportunity from the combination is with the introduction of simplified and flexible residential and SMB pricing and packing for Spectrum-branded services in Cox markets.
To that end, Winfrey said the aim is to approach the residential and small business segment “as quickly as possible” with Spectrum offerings, utilizing existing Cox systems “which are significant and powerful.”
Another aim is to ensure customers don’t feel a difference between any market and that there’s cohesion and seamless onboarding as they interact across the company, its portals, the MySpectrum app, Spectrum TV app and how they receive and view content on the Xumo streaming devices. For that aspect, it aims to have customer agents prepared to service customers on a nationwide basis, where the company sees a chance to insource into the Cox footprint to hire for additional jobs.
And with prior M&A deals, alongside new bundling options and a Life Unlimited brand refresh introduced last year, Winfrey said the company has already had success in going to market and migrating customers to new packages.
“We have a lot of experience to how to go to market with new pricing and packaging and migrate the existing base in a way that is customer friendly, that can lower their overall rate for product but still preserve the overall ARPU per household,” Winfrey said. “And that’s the strategy we’ll execute there.”
Video business opportunity
While traditional pay TV has been a declining business at large, Charter has managed to stem bleeding better than most others in the industry – including since pursuing and securing new programming carriage deal models that have allowed for the inclusion of a roster of ad-supported SVOD apps within pay TV packages at no additional cost to consumers.
And while not getting into contract specifics, Winfrey said “we don’t have any material concerns over the agreements that we have” in terms of the ability to port those, including ones it has worked to get in place with programmers for inclusion of streaming apps, to service offers in the new Cox footprint. Although it sounds like discussions with programming partners are still to be had.
Stepping back, Winfrey said the relationship with programmers has changed, where they too understand Charter is trying to grow the video business, contending “there's no better economic way for them to have programming delivered to customers than through the MVPD relationship that we offer and the integration of seamless entertainment.”
On the call Friday, Charter CFO Jessica Fischer said that in video, Cox has become less penetrated from a customer perspective over time, where a combination with Charter and its new model can help deliver more value for consumers and programmers.
“With what we can do around pricing and packaging and what we've done with the programmers to build a more valuable video product, I think there's a lot of potential for us to create value in a different way for the programmers,” Fischer said.
And for Charter itself, Winfrey sees potential from bringing its service offering strategy, along with the Xumo Stream Box option for new video customers with visions for seamless entertainment to Cox markets, together which he said “offers a real top line video revenue opportunity.”
“Now, whether that means just less losses on video or more video growth, I'm not in a position to go forecast that today,” he noted, “But I think it can be better than what it is on its current trajectory, and so that's a revenue enhancement opportunity as well.”
And while acknowledging it’s not the most material aspect of the deal, Winfrey said advertising is still a big piece. Charter has made investments in addressable advertising and the ability to operate across different third-party platforms, and Winfrey sees opportunity “to accelerate not just Cox’s advertising growth, but the pro forma company.”
Needs regulatory approval
Of course, the transaction will still need to clear regulatory approvals in order to get done.
Winfrey expressed confidence, saying the deal is great for consumers and for US employment, as again, Cox and Charter don’t have much overlapping footprint, and face competition from others for most services. On the mobile broadband front, it has Verizon, T-Mobile and AT&T, as well as competition from satellite providers and fiber overbuilders, while on the video side it competes with Dish, DirecTV, virtual MVPD’s like YouTube TV, not to mention free and subscription streaming options.
Still, amid an uncertain regulatory environment, Winfrey said “we feel good” about the ability to demonstrate those benefits to regulators, noting the combined company will be able to provide better services at lower prices, while also investing in AI and US jobs.
“We'll have the ability to create jobs, good paying jobs, with career opportunities and even stock ownership opportunities. We have the ability to offer lower prices per product to the Cox consumers in that footprint,” Winfrey said.
He cited potential for a deal closing timeframe of mid-2026 but suggested a level of uncertainty and said the company would follow the lead of regulators.
“We’re honored that the Cox family has entrusted us with its impressive legacy and are excited by the opportunity to benefit from the terrific operating history and community leadership of Cox,” said Winfrey in a statement. “Cox and Charter have been innovators in connectivity and entertainment services – with decades of work and hundreds of billions of dollars invested to build, upgrade, and expand our complementary regional networks to provide high-quality internet, video, voice and mobile services. This combination will augment our ability to innovate and provide high-quality, competitively priced products, delivered with outstanding customer service, to millions of homes and businesses.”