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Charter-Time Warner Cable Deal Gets Regulatory OK, Netflix A Winner

The Justice Department approved the Charter Communications ( CHTR ) takeover of Time Warner Cable ( TWC ) and Bright House Networks after the cable giants agreed to concessions that should benefit Netflix ( NFLX ) and other streaming media. Federal Communications Commission Chairman Tom Wheeler also backed the deal. The FCC will likely approve the combination soon. After that, California regulators would pose the final hurdle for the merger. They are expected to approve it in a vote next month. As part of the deal, Charter will expand the number of homes with broadband access by 2 million, including 1 million with another high-speed provider, Wheeler said. Netflix has endorsed the deal, based on Charter’s pledges. Charter agreed to not impose data caps or tie Internet rates to usage. Charter also won’t be allowed to sign deals with content providers to make it harder for Netflix and other streaming services to get content. Charter said last year it would have some 23.9 million cable and broadband customers in 41 states, with big gains in Los Angeles and New York. It would be the No. 2 broadband operator after Comcast ( CMSCA ). Charter Communications in May 2015 agreed to buy Time Warner Cable for $55.1 billion and Bright House for $10.4 billion. That followed the collapse of Comcast’s planned Time Warner Cable buy due to regulatory objections. Charter Communications stock rose 4.6% to 207.01 on the stock market today , with Time Warner Cable climbed 4.1% to 209.83. Netflix fell 2.4% as shares still reel from last week’s weak subscriber outlook. Comcast fell fractionally. Related: How Charter Broadband Conditions May Set Bar For Comcast

How Charter Broadband Conditions May Set Bar For Comcast

Charter Communications ( CHTR ) will not be allowed  to charge data usage-based prices or impose data caps on broadband customers for seven years as part of proposed conditions set by federal regulators  for its acquisition of Time Warner Cable ( TWC ). Whatever conditions Charter agrees to might set the bar for Comcast ( CMCSA ) down the road, analysts say. The Department of Justice on Monday cleared Charter’s purchase of TWC, while the Federal Communications Commission moved closer to approval.  FCC Chairman Tom Wheeler is circulating proposed conditions to the five-member agency. California regulators are expected to green light the purchase in mid-May. Charter snapped up TWC after regulators thwarted Comcast’s takeover of Time Warner Cable in early 2015. Conditions set on the Charter-TWC deal might have implications for Comcast if it seeks another major acquisition, such as acquiring T-Mobile US ( TMUS ) or Sprint ( S ). Comcast has filed to be a possible bidder in a government auction of radio spectrum owned by local TV stations. That auction began in late March. Comcast has been testing data caps in an increasing number of markets. “New Charter will not be permitted to charge usage-based prices or impose data caps,” Wheeler said in a statement. “Second, New Charter will be prohibited from charging interconnection fees, including to online video providers, which deliver large volumes of internet traffic to broadband customers.” Video streamer Netflix did not oppose Charter’s purchase of TWC, but it had lobbied against the Comcast-TWC deal. Charter can’t strike agreements with programmers that would make it more difficult for streaming services like Netflix ( NFLX ) to obtain content, according to a DOJ filing in federal court. Charter has also agreed to buy privately held Bright House Networks. The two deals would make Charter the No. 2 cable TV firm behind Comcast.

Netflix Stock Gets Belated Price-Target Cut From UBS

Nearly a week after Netflix ( NFLX ) reported mixed first-quarter earnings and gave disappointing second-quarter guidance, UBS analyst Doug Mitchelson joined the crowd on Wall Street and lowered his price target on Netflix stock. About a dozen analysts cut their price targets on Netflix within a day of the Internet TV service releasing Q1 results after the close April 18. At the time, Mitchelson reiterated his buy rating on Netflix and his price target of 147. On Monday, Mitchelson maintained his buy rating but cut his price target to 141. Netflix stock was down 2.5%, near 93.50, in afternoon trading on the stock market today . Earlier, Netflix stock touched a two-month low of 92.80. Last Monday, Netflix had ended the regular session at 108.40. “We believe expectations for growth have been reset, and catalysts rebuilding for Netflix, after a negative catalyst period (global rollouts completed ex-China and Q2 seasonality not modeled right by the Street),” Mitchelson said in a report. Netflix should show stronger international growth the rest of the year, exiting the seasonally weak first half, he said. Profit margins in the second half of the year “should ramp aggressively” as price increases flow through to the bottom line and global rollout costs ease, he said. Mitchelson predicts that Netflix will penetrate 60% of U.S. broadband homes by 2020 (61.3 million subscribers) and 13.8% of international broadband homes by 2020 (101.4 million subscribers). “We believe Netflix’s core competencies in both content and technology will drive a virtuous circle of greater subscribers and increased viewing time, enabling higher ARPU (average revenue per user), which will fuel increased content spending and attract/retain more subscribers globally,” he said. Image provided by Shutterstock . RELATED: 5 Key Takeaways From Netflix’s Troubling Q1 Earnings Report .