Malone Says He’s Open to Pacts With U.S. Cable Companies

John Malone, the billionaire chairman of the Liberty group of companies, said he’d be interested in agreements with U.S. cable carriers to move toward an industry alliance.

Charter Communications Inc. (CHTR), which got an investment last month from Liberty Media Corp. (LMCA), may consider transactions with other cable companies, Malone said on CNBC. Liberty Media agreed to buy a 27 percent stake in Charter last month for $2.62 billion,

“We can be exceptionally strong with that company for a number of years, and in particular the rate of free cash flow can be very, very strong, which allows it then to access the leverage market in order to do roll-up transactions, particularly where there’s horizontal synergies,” he said. “That’s the growth scale, and then look for opportunities to work with other cable companies to form a consortium.”

The model would be similar to the strategy of Tele- Communications Inc., which Malone built decades ago into one of the country’s biggest pay-TV companies. The Charter investment marked the billionaire’s return to the U.S. industry after he sold TCI to AT&T Corp. in 1999. In the meantime, he has focused on the European pay-TV market, with investments through overseas cable business Liberty Global Inc.

Regrets Sale

Malone said he regretted selling TCI to AT&T after witnessing cable’s huge opportunity in broadband as the Internet has expanded for consumers and businesses. Cable companies can increase online speeds to 1 gigabit per second, about 75 to 100 times faster than the average U.S. connection today, with little extra capital investment, he said.

Malone also praised Charter Chief Executive Officer Tom Rutledge, who took over in February 2012. Charter has already taken steps to increase its size after announcing an acquisition of Cablevision Systems Corp.’s Optimum West unit for $1.63 billion in February. Rutledge was Cablevision’s chief operating officer before taking the job at Charter.

Borrowing money for acquisitions makes sense as long as interest rates remain low, Malone said. Charter has $12.9 billion of debt and a market valuation of $10.6 billion, according to data compiled by Bloomberg. Benchmark 10-year Treasury yields fell seven basis points, or 0.07 percentage point, to 1.72 percent today.

Charter rose 0.2 percent to $105.06 at the close in New York. The shares have gained 38 percent this year.

Alex Dudley, a Charter spokesman, declined to comment on Malone’s remarks.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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