The U.S. cable industry could see further consolidation in the coming months if the prognostications in a new report from Macquarie Capital come true.
The report from analysts Amy Yong, Rachel Arrowood and Allesandra Gonzalez predicts "a hotbed of M&A activity in the space." This includes a potential acquisition of Cox Communications Inc. by Charter Communications Inc. (CHTR) - Get Report , which would be a significant win for the Stamford, Conn., company. Atlanta-based Cox is the third-largest cable provider in the U.S., with 6.2 million customers and rakes in annual revenue of $20 billion.
Charter, which declined to comment for this story, already has acquired Time Warner Cable Inc. and Bright House Networks LLC in recent years for $67.1 billion. If the Cox deal came together, it would represent a major consolidation of the broadband market, as Philadelphia's Comcast Corp. (CMCSA) - Get Report , Charter, Cox and Altice USA Inc. (ATUS) - Get Report of Bethpage, N.Y., control 90% of the market share.
This is not the first time Cox has had wealthy suitors, though, and the family-owned conglomerate has rebuffed all of them so far.
"We've been very vocal, very consistent and very clear that we're not sale," Cox spokesman Todd Smith said. "At some point, the hypotheticals become irresponsible. We're not for sale; we're investing aggressively in our networks and products and in acquisitions of our own."
Despite Cox's declared intent to go-it-alone, a Charter bid could see competition from Altice NV, Macquarie suggested. The Netherlands-based operator has built a U.S. arm by integrating TV and internet providers Suddenlink Communications Inc. and Cablevision Systems Corp. in recent years and is likely to target further expansion.
Altice USA, the company formed from Suddenlink and Cablevision, notably raised $1.9 billion in its IPO on Wednesday, June 21. That may embolden the telecom company going into the summer months.
"With ~4.3m broadband subs, we believe [Altice] could gobble up smaller regional players and quickly double its size," the report said.
Altice USA itself has signaled its interest in M&A, with CEO Dexter Goei telling investors in May that it was "part of our core strategy and DNA to continue to look at acquisitions."
Charter declined comment on a potential deal. Altice could not immediately be reached for comment.
Besides Charter and Altice, another potential buyer on the market is WideOpenWest Inc., but its disappointing $310 million IPO last month -- which priced at $17 per share, well below the $20 to $22 range -- may be an obstacle. Potential sellers include Cable One Inc., Mediacom LLC and Frontier Communications Corp. (FTR) - Get Report , according to the Macquarie report.
Whatever acquisitions do materialize would have to be approved by the Federal Communications Commission, which the Macquarie analysts noted is much less stringent than it was a few years ago. Democratic senators recently have been vocal in trying to prevent monster acquisitions such as the pending AT&T Inc. (T) - Get Report purchase of Time Warner Cable Inc. (TWX) but likely do not have the necessary sway to make much of an impact.
In other words, get ready for a busy summer in the M&A market -- the landscape may look much different come September.
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Editors' pick: Originally published June 23.