Comcast has agreed to transfer a portion of its post-merger subscribers to Charter Communications in preparation for the pending buyout of Time Warner Cable.
“Charter will acquire approximately 1.4 million existing Time Warner Cable subscribers, increasing Charter’s current residential and commercial video customer base from 4.4 million to approximately 5.7 million, and making Charter the second largest cable operator in the United States,” said Comcast in a press release.
Comcast has 30 million video subscribers. In addition to the sale, Comcast and Charter will trade 1.6 million subscribers in different markets.
Comcast and Charter will create a third entity to handle around 2.5 million more Comcast customers. The new entity is called SpinCo and it will be publicly traded. Charter will control 33% of it and 67% of it will be controlled by Comcast shareholders. Comcast will not have any connection to the company though.
When Comcast announced it was planning to acquire Time Warner Cable, it promised to keep its share of the cable market at under 30% by divesting around 3 million customers as per FCC rules. The FCC used to have a rule that banned any cable company from owning over 30% of U.S. subscribers because anything larger would give it quasi-monopolistic power in negotiating TV programming deals. This rule was thrown out by a D.C. court in 2009, but Comcast adheres to the cap to mitigate fears of its size.