The esteemed cultural critic that was my tortured, self-deprecating and ultimately prematurely deceased mother had a phrase whenever she’d see something that she found to be beyond explanation, such as when one of her fellow Entenmann’s loving Mah Jongg buds would decide to sport hot pants. With a caustic drag on her Marlboro 100 she’d mutter “She looks like two pounds of sh-t squeezed into a one pound bag”.
I had much the same reaction when this news broke yesterday, in this case objectively by UPI’s Simon Druker:
Charter Communications, one of the largest telecommunications companies in the United States, announced a merger Friday with privately held Cox Communications in a multi-billion-dollar deal.
Once the merger is completed, the new entity will retain the name of Atlanta-based Cox, a subsidiary of parent company Cox Enterprises, a private firm founded in 1898 that also has dealings in the automotive industry. Cox acquired its first cable franchise in 1962.
Under the terms of the deal, Connecticut-based Charter is acquiring all of Cox’s commercial fiber and managed IT and cloud businesses. Cox will also get $4 billion worth of cash and approximately $17.9 billion worth of combined shares, giving the parent company an approximately 23% ownership stake in the new venture.
In simplest terms, it’s the kind of combination we saw in media throughout the 90s and oughts, where companies joined forces like Transformers and the Justice League with dizzying regularity. They resonate with Wall Street largely because of the more obvious benefits: scale to compete with existential threats like emerging technology, and the inevitable cost-efficiencies that result from the elimination of redundant positions.
As Druker noted, the initial reaction seemed to endorse this move:
Charter Communications’ stock climbed sharply on the Nasdaq Composite at market open Friday before retreating somewhat. The company’s shares were up $7.03 or 1.68% at 10:42 a.m. EDT.
But as the day wore on and others chimed in, whatever ebullience might have been anticipated by those that put this together may have begun to wane. FORTUNE’s Chris Morris weighed in with some cautionary caveats regarding the climate this is occurring in:
Cable and broadband companies have been seeing increased competition on all fronts. Cell carriers are offering broadband service of their own and 5G cellular service is as fast as broadband offerings in some cities. In addition, consumers have moved to streaming services, which have aggressively chased customers with lower prices for the past several years. Live sports have kept many cable subscribers from cancelling their subscriptions, but leagues are increasingly exploring distribution options with those services. The merger comes as cable operators see subscriptions diminish and broadband customers explore other options. Charter lost 60,000 internet customers in the most recent quarter.
And as anyone who actually has had to experience beings serviced by either of these companies, it’s easy to see why that happened. John Oliver of THE GRANTS PASS TRIBUNE weighed in, clearly framed by real-world interactions:
Both Charter and Cox have long-standing reputations for inconsistent customer service, frequently ranking low in national satisfaction surveys. Complaints about billing errors, long wait times for technical support, and delayed service appointments are widespread. The American Customer Satisfaction Index (ACSI) has repeatedly ranked both companies near the bottom of the telecommunications industry in terms of customer experience. Bringing these two giants together does not immediately inspire confidence among consumers who are already frustrated with either provider.
I chose this publication because it services my best friend’s rural area, and I have dealt first-hand with poor service quality for years, and have heard from her friends and neighbors pretty much what Oliver reported. And as he continued, trying to strongarm people into accepting this is just the way it is is hardly a foundation where growth is a given:
The primary concern stems from the potential formation of a near-monopoly in several regions where both companies already dominate local markets. In many cities and rural areas, consumers already face limited choices when it comes to internet and cable service. A merger between Charter and Cox could further reduce competition, eliminating any incentive for the companies to improve pricing, innovate service options, or enhance customer support.
And as for those streaming options, I’ve already seen up close how these companies battle those forces on the content side. Cox continues to run a hodgepodge of 10 stations of varied affiliations in predominantly larger markets ranging from Boston and Atlanta to Memphis and Dayton. I know plenty of folks in those cities and to a person they contend that their local productions, including their digital properties, are outdated and pale in comparison to even their more aggressive upstart competitors. And Charter throughly screwed up their half-assed attempt to create content via its Spectrum brand, partnering with Sony on the overpriced ego trip that was L.A.’s FINEST, which gave Jessica Alba and Gabrielle Union free reign to provide minimal support when needed, and the ill-fated reboot of MAD ABOUT YOU that reinforced exactly how much better it was when Paul and Jamie Buckman were younger and less embittered. All the folks in Stamford did was make it near impossible to budget accordingly and they siloed any material information on proof of performance. As we later learned after numerous rounds of arm-twisting, their motivation to do so was utter embarrassment as to how underwhelming both shows’ performances were. And mind you, Sony at least gave them the same shot as they did virtually every other platform with similar tentpoles like familiar IP and promotable talent. Relatively speaking, they did better on Quibi. Their subscribers found other options they actually wanted to see.
And as for my bestie, I’m almost ashamed to admit that her solution to the perpetual lousy internet service was to invest in Starlink. Yes, Elon Musk does do a few things right, especially when the bar he’s being compared to is so low.
So do forgive me if I’m in the more dubious camp about all of this. And I’m taking particular note of how AXIOS’ Dan Primack–himself technically a COX empoloyee, threw out this food for thought in his recap dropped late yesterday:
- More than a decade ago, Cox was in advanced talks to merge with Time Warner Cable, but the deal fell through and Charter swooped in. Now it’s combining, in part, with those same assets.
What to watch: How Comcast responds.
- One possibility is that Comcast makes a play for Cox Communications and its six million subscribers.
Perhaps that’s just needless conjecture from a nervous employee. Or maybe it’s insider information from someone who knows that these aren’t exactly companies with great track records.
Regardless, it’s reason enough to be skeptical that this will yield any positive results for anyone outside of shareholders, and one encouraging day isn’t changing m mind on that yet. There’s a long summer ahead. And heaven forbid anyone tries to wear hot pants.
Until next time…