New Street Research equity analyst Jonathan Chaplin responded positively to a Bloomberg report Monday that Charter Communications is in private talks to possibly acquire devalued cable operator Altice USA, saying the two MSOs' regional footprints in New York, Connecticut and Massachusetts and "would fit well together."
But in a note to investors, Chaplin also said it would be "irresponsible" for Comcast not to also take a look at struggling Altice USA.
"We would put the probability that Comcast has discussions with Altice at very high. We would put the prospect of a competing bid, if any of this turns out to be true, much lower," Chaplin wrote.
Chaplin also said it would make sense for T-Mobile to also take a run at Atlice USA, although he doesn't believe the wireless company's counteroffer prospects are as good as the one Comcast could render. (Fierce Wireless and Light Reading first reported on Chaplin's note.)
Altice USA has been trading at only a small fraction of its 2021 peak share price of nearly $40. But shares have spiked nearly 62% since Bloomberg's report.
None of the aforementioned companies have publicly commented on the M&A reports
“The industrial logic of putting Altice together with Charter or Comcast is powerful," Chaplin wrote. "It is slightly more powerful for Charter than it is for Comcast. The integration costs would be very high for both companies, and both are very aware of these costs. The leverage makes the deal very difficult, given the magnitude of the integration costs.”
During Comcast's Q4 earnings call in January, chief executive Brian Roberts tried to throw cold water on any M&A speculation.
“While there may be speculation what we could do next, I’d like you to hear it directly from me,” Roberts said. “I love the company we have. So the bar continues to be even higher for us to do anything other than the plan you heard today.”
