Charter Communications Inc. (NASDAQ:CHTR) shares jumped sharply on Monday, rising 13.8% to $152.03 in recent trading, after Comcast Corp (NASDAQ:CMCSA) announced plans to spin off its NBCUniversal and Sky assets. The move rekindled merger speculation in the cable sector, even though Charter itself has not made any new announcements. The stock earlier touched an intraday high of $171.50, representing a 28.3% gain from Friday's close of $133.64, before paring gains. Trading volume reached 4.7 million shares, 1.7 times the typical full-day volume from the prior week, adding approximately $2.3 billion to Charter's market capitalization.
The rally was spurred by Comcast's decision to separate its cable, wireless, and business services from its media and entertainment operations, which include Universal theme parks, film and TV studios, NBC, Peacock, and Sky. Shareholders will receive stock in both entities, with Comcast retaining up to 19.9% of NBCUniversal for up to a year post-spin. Chairman Brian Roberts stated the split will 'unlock a more entrepreneurial management approach.' Analysts at eMarketer and PP Foresight noted that connectivity and media are no longer aligned, making NBCU a potential acquisition target.
Despite the surge, Charter's stock remains significantly below the average price paid in its first-quarter share buyback program. The company repurchased 4.3 million shares for $963 million, at an average price of approximately $224 per share. At Monday's price, the stock is trading about 32% below that level, implying that it would need to climb another 47.3% to match the buyback average. This gap highlights the disconnect between management's valuation and current market sentiment.
The Comcast spin-off has revived talk of a potential Comcast-Charter merger, a topic that has been debated for years. In January, New Street's Blair Levin suggested that regulatory clearance for such a deal could be possible if Comcast were to divest NBCUniversal. Monday's announcement partially addresses that condition, but no formal offer has been made. Light Reading noted that Levin previously called a merger a 'no way' without the media spin-off, but now the landscape has shifted.
Charter is already pursuing a major acquisition. The FCC cleared its $34.5 billion deal to buy Cox Communications in February, which would create the largest U.S. cable TV and broadband provider with about 38 million subscribers. The companies expect $500 million in cost synergies within three years after the anticipated mid-2026 close. Charter will also assume $12.6 billion in Cox net debt and other liabilities. FCC Chair Brendan Carr said the deal 'means that customers will get access to lower priced plans.'
Charter's core business continues to face challenges. In the first quarter, the company lost 120,000 Spectrum Internet customers, while total revenue fell 1.0% to $13.60 billion. Adjusted EBITDA declined 2.2% to $5.6 billion. However, mobile service revenue grew 15.1% to $1.05 billion, with 368,000 net mobile line additions. Video revenue dropped 9.2% to $3.25 billion, reflecting ongoing cord-cutting trends. Capital expenditures totaled $2.9 billion, including $812 million for new lines.
Mobile remains a bright spot. Reuters reported on June 27 that Charter has held executive discussions with SpaceX about launching a U.S. consumer mobile service, potentially routing some SpaceX mobile traffic over Charter's wired network. SpaceX already has a direct-to-cell agreement with T-Mobile US Inc (NASDAQ:TMUS). Charter declined to comment, and SpaceX was not available.
Charter's shares have lost steam after the early spike, now trading 11.4% below the intraday high. No new investor relations updates were posted on June 29, with the latest materials from May. The broader Communication Services Select Sector SPDR Fund (NYSEARCA:XLC) gained 2.1%, while the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) rose 1.4%. Comcast added 10.1% to $25.52, and Liberty Broadband Corp (NASDAQ:LBRDA), which is tied to Charter, climbed 13.5% to $35.55.
