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Charter's largest shareholder has reservations about Altice deal

With investors watching to see if Altice USA Inc. will make an offer for Charter Communications Inc., Greg Maffei, CEO of Charter's biggest shareholder Liberty Broadband Corp. Inc., was asked on Aug. 9 whether he would support such a deal.

Speaking during a Liberty Broadband earnings conference call, Maffei said, "Of course we will listen to any and all offers that come in and judge them on their merit and appeal."

But he noted that any deal for Charter would have to offer more than just debt. "A lot of this is going to be based on … levering up Charter. If we want to lever up Charter, we have that opportunity," Maffei said in response to a question about Altice USA's reported interest in Charter.

"So any deal that would be appealing for us and other Charter shareholders I think would have to add real value and show real capabilities that are beyond what we think is a very well-positioned company with a very strong management team," the CEO said.

In 2013, Liberty Media Corp. agreed to acquire approximately 26.9 million shares and approximately 1.1 million warrants in Charter for approximately $2.62 billion, representing a 27% beneficial ownership stake in the cable company. That stake is now held by Liberty Broadband.

"Liberty Broadband, as the largest shareholder in Charter, has a big voice," Maffei said, adding, "We're involved in any discussions that might arise" around the cable company.

Maffei's comments come after Reuters reported Aug. 9 that Altice USA is eyeing Charter for a takeover.

Should such a deal come to fruition and pass regulatory muster, it would make the new Altice one of the largest U.S. cable operators. Based on subscriber metrics from the second quarter, a combined Altice/Charter entity would count 20.7 million video subscriptions, 27.7 million broadband customers and nearly 14 million phone subscribers, according to Kagan analyst Tony Lenoir. All in all, it would have a total of 31.7 million customer relationships across a footprint counting 58.2 million serviceable homes and businesses. Kagan is a media research unit of S&P Global Market Intelligence.

"An Altice USA/Charter tie-up would be the largest cable M&A transaction of all time, dwarfing the record $77-billion Charter/Time Warner Cable [Inc.] deal struck in May 2015," Lenoir said, noting that the resulting entity would control roughly 40% of the U.S. cable sector.

In 2015, prior to Charter's purchase of Time Warner Cable, Altice USA parent Altice NV had been in talks with Time Warner Cable about a potential deal. But the talks never moved forward and an agreement never materialized.

Altice NV founder Patrick Drahi told Reuters that at the time Altice was "not ready" for a deal of that size in the U.S. market. But he added, "Time is on our side."