- With this acquisition, Charter is essentially repurchasing its shares at a discount
- Alaska isn’t an attractive market for Charter, and including GCI in the deal would have likely caused regulatory headaches
- Charter shareholders prefer more share repurchases over rural expansion
Charter Communications is making the latest move on the telecom M&A front, announcing today it will acquire Liberty Broadband. But it won’t be getting Alaskan operator GCI as part of the deal.
Liberty Broadband, which owns shares in a broad range of communications businesses, acquired GCI in 2020. It also has a 26% ownership of Charter, or around 45.6 million shares of Charter’s common stock.
The Liberty buy “is a very straightforward transaction in which Charter is effectively repurchasing their own shares at a discount,” said New Street Research’s Jonathan Chaplin in a note to investors.
GCI will spin off into an independent public company prior to the transaction’s close, which is currently estimated to occur on June 30, 2027. Liberty Broadband will distribute the GCI business among its stockholders.
Charter didn’t have much to gain from acquiring GCI anyway, according to Recon Analytics principal Roger Entner, what with “all the headaches of regulatory approval” and then having to operate in Alaska.
“GCI is not that attractive. Alaska is not a growing market, weather is not that great so construction is tough,” Entner told Fierce. “Due to the geographic distance, there are little to no synergies.”
GCI is the largest telecommunications company in Alaska, and it’s undertaking several fiber projects to connect underserved communities in the state.
Charter’s got a sizable rural build of its own, thanks to the bids it won via the Rural Digital Opportunity Fund (RDOF). However, it plans to spend “substantially less” on BEAD-funded deployments, execs said on the company’s Q3 earnings call.
MoffettNathanson analyst Craig Moffett said Charter investors seem pleased GCI wasn’t included in the Liberty buy.
“This fits with the positive reaction Charter got two weeks ago when they indicated that they would not participate as aggressively in the rural BEAD program,” he said. “Charter shareholders would rather see more share repurchases and less rural expansion.”
Liberty Broadband is controlled by media mogul John Malone, who is moving to streamline his media and telecom assets, including Liberty Media. Today, Liberty Media announced it would split into two companies to focus on sports and live entertainment, respectively.
Malone currently owns 48% of Liberty Broadband, Entner said, whereas Liberty Media CEO Greg Maffei (who announced today he’s stepping down) owns 4% of the company. That gives Malone and Maffei “effective control of Liberty and therefore a blocking minority of Charter.”
But once Charter and Liberty seal the deal, Malone would only have 12% control of Charter.
“This gives Charter leadership a lot more flexibility to do what it wants rather than having to take into account what a blocking minority shareholder controlled by Mr. Malone wants,” Entner concluded.
