Comcast offered to sell 1.4 million pay TV subscribers to Charter Communications for $7.3 billion as part of a transaction aimed at winning regulatory approval for its proposed $45 billion takeover of Time Warner Cable.
Comcast (CMCSA) also said it would divest another 2.5 million subscribers into a new publicly traded company, dubbed SpinCo for now, to be one-third owned by Charter (CHTR) and two-thirds by Comcast shareholders.
The deal would make Charter -- whose own bid for Time Warner Cable (TWC) was thwarted by Comcast's higher offer -- the second-biggest U.S. pay TV company with 5.7 million customers, overtaking Cox Communications.
Charter's shares rose as much as 10 percent to $142.70 in early trading Monday. Comcast shares were up 1.4 percent at $51.70.
Comcast would have less than 30 percent of the U.S. residential cable or satellite TV market after the deal, the company said in a statement.
The agreement is contingent on Comcast's Time Warner Cable deal being approved by the Justice Department and the U.S. Federal Communications Commission, a process that could take many months.
%VIRTUAL-article-sponsoredlinks%Analysts said the deal was a pre-emptive move by Comcast ahead of a review of the deal by regulators.
"Comcast wanted to do this deal now with Charter so it could get in front of regulators at the Justice Department and the FCC at the same time as the Time Warner Cable deal," a source familiar with the matter said.
The source said there was a standstill agreement with Charter stipulating that it can't gain full control of SpinCo for four years. Comcast will have no ownership in SpinCo.
SpinCo would have an estimated enterprise value of $14.3 billion and an equity value of $5.8 billion, Charter and Comcast said in an investor presentation.
The divestments, mostly in the U.S. Midwest, would deliver about $19.5 billion in value to Comcast shareholders, the companies said.
"For Charter, this deal is a transformative event and sets them up over time to consolidate the balance of the rest of the cable industry," Pivotal Research Group analyst Jeff Wlodarczak told Reuters, adding that the deal was good for both parties.
More Clout for John Malone
Charter's deal with Comcast marks an acceleration of John Malone's effective return to cable through his investment vehicle Liberty Media (LMCA), which owns about 27 percent of Charter, Wlodarczak said.
Liberty Media got involved in working with Comcast but Charter did the nuts and bolts of the deal, the source said.
Cable pioneer Malone, who set up the largest cable operator in the U.S. before selling it to AT&T (T) in 1999, returned to the U.S. cable market with Liberty's investment in Charter in March 2013.
In addition to the divestments, Charter and Comcast will swap about 1.6 million customers.
Charter will get the Detroit and Minneapolis-St. Paul markets, the companies said in the presentation.
Comcast will get parts of the Los Angeles, New York state, western Massachusetts, North and South Carolina and parts of Texas and Georgia markets.
Time Warner Cable had 11.2 million residential video subscribers as of March 31, while Comcast had 22.6 million.
Charter, which also reported better-than-expected first-quarter revenue, said it expected to fund the purchase of 1.4 million customers through debt.
Time Warner Cable shares were up 1 percent at $141.01.
-Additional reporting by Abhirup Roy and Sruthi Ramakrishnan in Bangalore.
10 Easy Ways to Pay Off Debt
Comcast Offers to Shed Customers to Get OK for TWC Merger
"Your daily habits and routines are the reason you got into this mess," writes Trent Hamm, founder of TheSimpleDollar.com. "Spend some time thinking about how you spend money each day, each week and each month." Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Ask yourself: What can I change without sacrificing my lifestyle too much?
Remove all credit cards from your wallet and leave them at home when you go shopping, advises WiseBread contributor Sabah Karimi. “Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control,” she writes.
If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don't need. So clear that information. "If you’re paying for a recurring service, use a debit card issued from a major credit card service linked to your checking account," Hamm writes.
Reward yourself when you reach debt payoff goals. "The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated," Bakke writes. Just make sure to reward yourself within reason. For example, instead of a weeklong vacation, plan a weekend camping trip. "If you aim to reduce your credit card debt from $10,000 to $5,000 in two months," Bakke writes, "give yourself more than a pat on the back."
“Establish a budget,” writes Money Crashers contributor David Bakke. “If you don't scale back your spending, you'll dig yourself into a deeper hole." You can use personal finance tools like Mint.com, or make your own Excel spreadsheet that includes your monthly income and expenses. Then scrutinize those budget categories to see where you can cut costs.
Sort your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. "By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards," writes Mint.com spokeswoman Hitha Prabhakar.
To make a dent in your debt, you need to pay more than the minimum balance on your credit card statements each month. "Paying the minimum -– usually 2 to 3 percent of the outstanding balance -– only prolongs a debt payoff strategy," Prabhakar writes. "Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments." Or if your minimum payment is $100, try doubling it and paying off $200 or more.
If you have a high-interest card with a balance that you’re confident you can pay off in a few months, Hamm recommends moving the debt to a card that offers a zero-interest balance transfer. "You’ll need to pay off the debt before the balance transfer expires, or else you’re often hit with a much higher interest rate," he warns. "If you do it carefully, you can save hundreds on interest this way."
Have any birthday gifts or old wedding presents collecting dust in your closet? Look for items you can sell on eBay or Craigslist. "Do some research to make sure you list these items at a fair and reasonable price," Karimi writes. “Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible." Any profits from sales should go toward your debt.
If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. "Avoid the temptation to spend that bonus on a vacation or other luxury purchase," Karimi writes. It’s more important to fix your financial situation than own the latest designer bag.