Malone's deal making confirms consolidation phase for digital TV market

SAN FRANCISCO — With Liberty Media Chairman John Malone working two cable deals simultaneously, the latest telecom investment boom that's given consumers access to mobile, digital TV looks to be firmly in its consolidation phase.

The proposed $55 billion takeover of No. 2 Time Warner Cable by No. 3 Charter Communications — in which Liberty has roughly a 25% stake — comes on the heels of AT&T's $48.5 billion acquisition of DirecTV.

Earlier this month, Verizon made a $4.4 billion bid for AOL and its digital content.

Chartered will also assume $24 billion in debt, just as AT&T took on about $19 billion in its deal last week.

Huge telecom-service providers are now betting with their assets and balance sheets that the best way to boost share in the market for digital entertainment is to buy it, rather than build it.

If federal telecom regulators approve the deal — and a $2 billion break-up fee means the companies are betting big on approval — Malone will get what was denied to Comcast CEO Brian Roberts: control of the second-biggest provider of U.S. cable and broadband service.

Including the acquisition of Bright House Networks, which Chartered is also buying with the help of a $700 million infusion from Liberty, the new combined company will have 24 million subscribers.

That's second only to Comcast's 28 million customers.

For media giants like Disney and Comcast's NBC Universal unit, as well as other content creators, that means a market with fewer distributors bidding for their news, sports and entertainment offerings.

For consumers, it will ultimately mean fewer choices for those services and high-speed Internet.

These deals are vintage Malone, who has a history of gaining control of larger competitors in complicated deals.

Helped by a $4.3 billion investment from Liberty, Chartered will be using some cash, issuing new shares and assuming a large amount of debt to acquire the larger Time Warner.

Still, Malone isn't getting in cheap, as the cash and equity portion of this transaction is worth significantly more than Comcast's failed $45 billion bid for Time Warner.

That offer was withdrawn under pressure from Washington.

All told, Malone and Liberty are putting in $5 billion, and the new Chartered shares will be dilutive to the existing stakes of current shareholders, including Liberty's own.

Yet Chartered shares rose about 2.5% on news of the deal, which means at least some on Wall Street are willing to bet along with Malone on his plan to help consolidate digital TV distribution.

John Shinal has covered tech and financial markets for more than 15 years at Bloomberg, BusinessWeek,The San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.