Comcast is already attempting to take over Time Warner Cable systems, which provide cable TV and high-speed Internet service to 1.5 million customers in the Los Angeles region. Combined, the two cable giants would serve more than a third of the nation's cable TV and residential high-speed Internet market.
But under the proposal unveiled Monday, Comcast would gain even more turf and customers in Southern California.
Nearly 280,000 homes in Southern California that currently receive cable service from Charter would be switched to Comcast as early as next year. The Charter customers live in areas including Long Beach, Burbank, Glendale, Whittier, San Bernardino, Riverside and San Luis Obispo.
The deal stems from Comcast's commitment to shed at least 3 million subscribers from its eventual national footprint, in an effort to win the federal government's approval of its acquisition of Time Warner Cable. Comcast currently provides service to 22 million customers nationwide, and adding the Time Warner Cable customers would expand Comcast's business to more than 33 million homes.
Monday's transaction allows Comcast to cherry-pick the markets it wants to retain and, in the case of Southern California, actually increase its heft. At the same time, Comcast's customer base is expected to come in at just under 30 million homes.
Comcast can only execute the Charter swap if it obtains federal approval for its $45-billion acquisition of Time Warner Cable, which the company announced in February.
Once all the deals are completed, Comcast would become the region's dominant provider of cable TV and high-speed Internet service in Southern California with nearly 2 million customers.
Consumer watchdogs said Monday's deal underscores their unease with Comcast's growth plans.
"Cable barons have always been great at dividing up the country and refusing to compete with each other," Matt Wood, policy director for the advocacy group Free Press, said in a statement. "Transforming three giant companies into two behemoths gives no comfort to content providers or consumers. Lawmakers and antitrust authorities shouldn't be fooled either."
Comcast Chief Executive Brian Roberts said the agreement "follows through on our willingness to divest subscribers, while also marking an important step in our merger with Time Warner Cable."
The proposed transactions with Charter and the "realignment of key cable markets," Roberts said, "will enable Comcast to fill in our footprint and deliver operational efficiencies and technology improvements."
Comcast estimated the value of the transaction to its shareholders at about $19.5 billion, which includes proceeds from asset sales, equity value in new entities as well as a $9-billion reduction in Comcast debt.
The Comcast-Charter transaction would unfold in three separate steps.
The first phase of the deal would have Comcast selling to Charter about 1.4 million subscribers — in Ohio, Wisconsin, Kentucky, Indiana and parts of Alabama — that currently receive their service from Time Warner Cable. Charter would pay Comcast about $7.3 billion in cash for those subscribers.
Those additions would allow Charter, which currently has about 4.4 million customers, to become the nation's second-largest cable provider, with nearly 5.7 million subscribers.
Charter has said that it needs to get bigger to better compete in a fast-evolving industry that requires huge capital investments to maintain systems and roll out new features and technologies.
The company initially tried to purchase Time Warner Cable last year but was rebuffed. This year, Charter attempted to recruit Comcast to help it buy Time Warner Cable but Comcast turned around and separately struck its own agreement.