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Charter’s Plan? Keep Looking

Though Charter Communications had staked much of its future growth on its own Time Warner Cable deal, the MSO will continue to grow organically — as it seeks other deals.

Charter started off last week confident that it was headed toward a positive outcome to its eight-month quest for TWC, putting forth an alternate slate of directors for the New York-based MSO that it believed would be more receptive to its deal. TWC had rejected Charter’s Jan. 13 $132.50 per share offer as “grossly inadequate.”

Following the announcement of the Comcast-TWC deal, Charter said it would continue with its efforts to grow organically, leaving the door open to future M&As.

“Charter has always maintained that our greatest opportunity to create value for our shareholders is by executing our current business plan, and that we will continue to be disciplined in this and any other M&A activity we pursue,” the company said in a statement.

CEO Tom Rutledge had said for months that Charter doesn’t need acquisitions to grow. And he has backed up his claims with results — Charter has consistently reduced basic-video subscriber losses since he joined the company in 2012 and has beefed up broadband speeds and improved product packages and pricing to spur future growth. With some of the lowest product penetrations in the industry, most believe Charter has nowhere to go but up.

“As they go a l ldigital, there will be more opportunities for higher-ARPU residential and commercial services, and future product rollouts become easier and quicker,” ISI Group media analysts Vijay Jayant and David Joyce wrote last week.

Still, investors were a bit disappointed in losing out on Time Warner Cable — Charter stock dipped 6% (by $8.66 per share) to close at $128.91 each Feb. 13.

The loss seems to be a major blow to Liberty Media chairman John Malone’s consolidation strategy. Liberty bought a 27% interest in Charter in March, in part to gain scale through acquisition. That could now include the 3 million subscribers Comcast has pledged to divest as part of the TWC deal.

In an interview with CNBC last Thursday, Comcast chairman and CEO Brian Roberts did not rule out selling systems to “John [Malone] or anyone else.”