Time Warner
Time WarnerReuters

Charter Communications has announced its plans on Tuesday to buy media giant Time Warner Cable in a cash and shares deal worth $78.7billion.

The new entity will compete with the cable market leader, Comcast, the parent company of NBC Universal, which has a customer base of 27 million.

The deal values the share prices of Time Warner Cable at $195.71, a 14% premium to its last closing price. The acquisition by Charter, the third biggest cable television provider in the US, is backed by Liberty Broadband Corp.

Last month, Comcast declined to buy Time Warner Cable in a $45.2 billion deal, following heavy pressure from Washington regulators. A successful deal would have served about 35 million residential and business Internet customers.

Government regulators had expressed concerns over acquisition of Time Warner Cable by Comcast, saying the deal was anti-competitive.

Charter will also merge another small cable provider Bright House Networks in a deal worth $10.4 billion. The combined entity will serve 23 million customers across 14 states, becoming the second largest cable operator next only to Comcast's 27 million customers.

The merged entity will be headed by Charter's Rutledge, who will serve as president and chief executive.

"No one has ever had a better sense of the multichannel world than John Malone (chairman of Liberty Media)," Leo Hindery, a veteran cable-industry executive, told The Wall Street Journal.

"Obviously he sees in Charter and Time Warner Cable a way to perpetuate a legacy that is unrivalled," Leo added.

US cable and internet companies are under severe pressure to cut costs in order to gain new customers.