On Monday, Comcast signed an agreement with Charter Communications on a series of transactions that, upon completion of Comcast’s previously-announced merger with Time Warner Cable (TWC), will result in a net reduction of approximately 3.9 million video customers for the post-merger entity. The three-part transaction also involves an exchange of subscribers between Charter and Comcast that is intended to improve the geographic service footprints of both cable operators. As the initial step of a transaction that will take place after the Comcast-TWC merger is complete, Comcast will divest to Charter 1.4 million TWC subscribers that will increase Charter’s residential and commercial video customer base from 4.4 million to approximately 5.7 million. In turn, Comcast will receive a cash payment from Charter which, following the divestiture, will emerge as the second-largest cable operator in the U.S. Under the second step, Comcast and Charter will transfer assets that serve 1.6 million TWC customers and 1.6 million Charter customers in a “tax-efficient like kind exchange.” Finally, Comcast will form and spin off to its shareholders a new, publicly-traded company that will operate cable systems that serve approximately 2.5 million Comcast subscribers. Shareholders of Comcast that include former shareholders of TWC will hold a 67% stake in the spin-off entity referred to as “SpinCo.” A new holding company that will be formed by Charter and that will hold 100% of Charter’s shares will hold the remaining 33% stake in SpinCo. Charter will also provide management services to SpinCo. As a result of these transactions, Comcast’s managed residential subscriber base will be reduced to less than 30% of the total multichannel video program distribution subscribers in the U.S.