Time Warner Cable had better come up with a PR strategy soon. Based on the withering criticisms that Charter execs just leveled in a presentation to Wall Street — part of a campaign to rally support for their $61.3B (including debt) acquisition offer — you’d think that the No. 2 cable company is run by the Three Stooges. TWC has “a failed operating strategy” with “substandard video and slow Internet” that has generated “the lowest customer satisfaction scores in the industry,” COO John Bickham says. “Their customers recognize this and punish them in the marketplace.” (For what it’s worth, Charter came in second to last, just slightly ahead of TWC, in J.D. Power’s September ranking.) Charter says that TWC shortchanged subscribers by failing to go all-digital. “A competitive product requires bandwidth,” Bickham says, but TWC clogs its lines with at least 50 analog channels, which require more capacity than digital ones do. Meanwhile the company “has fallen into the trap of what I call nickel and dime charges” including monthly fees for broadband modems. TWC has rejected Charter’s $132.50 a share cash and stock offer, saying that the company’s worth at least $160. But Charter notes that TWC traded for $96.15 in June before reports of a possible deal began to circulate — and its operations have deteriorated since then. Although CEO Tom Rutledge held firm to his offer, he says that his largest shareholder — John Malone’s Liberty Media — is willing to put more cash into the company. He also says that if Charter stepped in to make TWC all-digital, and engaged in “geographic rationalization,” then it could generate $750M in run-rate synergies and “drive the combined company to industry leading margins.”
TWC’s response: “There was nothing in Charter’s presentation and call today that changes the fact that its proposal is grossly inadequate. We have engaged with Charter, but Charter is not prepared to pay for a one-of-a-kind asset that Tom Rutledge referred to today as the biggest and best M&A option available. We are confident in our standalone plan and we are not going to let Charter steal the company.”
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