Beating Netflix

Using Sirius’s cash and lending capacity to combine Time Warner Cable and Charter would help the cable industry compete with Netflix, satellite-TV providers, and telecommunications giants AT&T Inc. and Verizon Communications Inc., which provide TV and Internet services.

“Changes in the cable industry that may reward scale combined with the availability of inexpensive debt make cable an attractive place to do deals,” Chris Marangi, a portfolio manager at Gamco Investors Inc., said in an interview.

Liberty Global, Malone’s European telecommunications holding company, is nearing an agreement to purchase Dutch broadband provider Ziggo, which has a 6.75 billion euro ($9.2 billion) market value, people with knowledge of the matter said. The companies aim to announce a friendly deal as early as the middle of this month, and are hammering out a final acquisition price and other terms, the people said.

In Holland, having one national cable brand with Ziggo can help foster innovation by creating a single standard for a new cable interface, Wunderlich’s Harrigan said.

Malone’s Mistake?

Still, Malone may be making a mistake targeting cable assets, according to Leo Hindery, who worked with him as president and chief executive officer of Tele-Communications Inc.

The industry’s days of charging $150 for Internet, TV and phone are numbered, Hindery said. As set-top boxes are eliminated and content and voice are accessed solely over the Internet, selling three products for $50 each will be replaced by one product that sells for much less, he said.

“Owning a lot of cable systems does not mean much to me,” Hindery said in an interview on Bloomberg Television. “The triple play is a fantasy. It is one wire.”

Malone sold TCI to AT&T Inc. in 1999, a move that he has recently said he regretted. Hindery said the billionaire is “absolutely wrong” to see the sale of TCI as a mistake. The cable industry is facing competition from DirecTV, Dish Network Corp., AT&T U-verse and Verizon’s FiOS, and will be unable to increase the price of broadband when wireless companies are also selling the same product, he said.