From the sound of it, Charter Communications Inc. (NASDAQ: CHTR) drove a harder bargain with Comcast Corp. (NASDAQ: CMCSA) than was first reported. In the deal announced Monday morning, Comcast said it has agreed to divest systems with about 3.9 million subscribers once the company’s merger with Time Warner Cable Inc. (NYSE: TWC) is approved and completed. When the negotiations were first reported, the divestiture totaled about 3 million subscribers.

According to the press release, the promised divestiture is in keeping with Comcast’s “willingness” to cut its subscriber total to less than 30 million subscribers “while maintaining the compelling strategic and financial rationale” of the proposed merger. Comcast and Time Warner combined have about 33 million subscribers, compared with 4.4 million for Charter.

Charter will acquire approximately 1.4 million Time Warner subscribers, and the two companies will swap another 1.6 million subscribers. Finally, Charter will form a new company that will hold both the existing Charter and a 33% stake in a new spin-off from Comcast that will serve 2.5 million customers. Charter ends up with about 5.7 million subscribers, some undisclosed geographic improvements and one-third of a new, small company.

Charter will pay an undisclosed amount of cash to Comcast for the 1.4 million additional subscribers. The 1.6 million subscriber swap is a like-kind exchange, and the new Charter will issue new shares to pay Comcast shareholders for Charter’s stake in the spin-off. Charter will also make payments over time as tax benefits from the sale are realized.

ALSO READ: Comcast and Time Warner Cable Merger Faces Stock Shock Dilemma

The press release notes that once the proposed merger between Comcast and Time Warner is completed and the transactions between Comcast and Charter are completed, Charter will be the second largest cable operator in the country. That is true, but it is a distant second.

Will this deal pass regulatory muster? The sentiment seems to be that it will, although how this is different from the proposed $40 billion merger between AT&T Inc. (NYSE: T) and T-Mobile that was rejected in 2011 is a reasonable question. Both the U.S. Department of Justice and the Federal Communications Commission opposed that plan and eventually AT&T withdrew the offer.

Given the antitrust concerns expressed over the AT&T offer for T-Mobile, the proposed Comcast-Time Warner merger should be tossed out without a second look. Here are the two largest cable operators proposing to merge into a new company more than five times the size of what will be the number two cable provider. Even if AT&T had been allowed to acquire T-Mobile, it would not have been that much larger than Verizon Communications Inc. (NYSE: VZ).

Had the AT&T deal gone through, the company would have owned more than 40% of all wireless subscribers at the time. Comcast is hoping that its 30% ceiling will be low enough to get the regulators’ approvals it needs. Time will tell.

ALSO READ: America’s Fastest Shrinking Cities

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.