The combination of system sales and swaps valued at $20B would affect nearly 5.6M cable subscribers — and would remove Charter as a potential obstacle to Comcast‘s $45B acquisition of Time Warner Cable — Financial Times reports. Word of a possible deal has been circulating for days, but the paper, citing “people familiar with the matter,” now says the companies are “close to agreeing” to the complicated transaction, perhaps this week. It’s all contingent on federal approval for the mega-deal to combine the nation’s two largest cable providers. The new agreement has three components: Charter would buy from Comcast systems now owned by TWC that include 1.4M subs. The cable giant would create a new company with 2.5M subs, in which Charter would have a 35% stake. And Comcast and Charter would swap 1.65M subs. FT says it’s “unclear exactly which subscribers will be swapped or the exact geographies under discussion.” Comcast wants to increase its clout in major markets, including New York and Los Angeles: The company has said that it sees big growth opportunities in offering business services.
But the deal would also help Charter and its largest shareholder, Liberty Media’s John Malone, fulfill their ambition to expand. In addition to the subs Charter would gain, it would have a major stake in the new company — which would instantly become the No. 5 cable operator. (Some analysts believe that Comcast wants to spin off many subs, instead of selling them directly, to reduce its tax liabilities.) Comcast CEO Brian Roberts also likely wants his counterpart at Charter, Tom Rutledge, and Malone on friendly terms. That would make it easier to advance his deal in Washington and on Wall Street. In addition, Comcast wants others in the industry to have warm feelings about the services it hopes to license across the country including its X1 set-top box platform. The companies probably want to have a peace agreement ready to announce in time for the cable industry’s annual trade show, to be held this coming week in Los Angeles.