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First on CNBC: CNBC Transcript: Charter Communications CEO Tom Rutledge Speaks with CNBC’s David Faber on “Squawk on the Street” Today

WHEN: Today, Tuesday, May 26th

WHERE: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a FIRST ON CNBC interview with Charter Communications CEO Thomas Rutledge on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET) today. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000382752.

All references must be sourced to CNBC.

DAVID FABER: NEWS OF THE DAY, CHARTER ANNOUNCING ITS DEAL TO ACQUIRE TIME WARNER CABLE. ALSO ACQUIRING BRIGHT HOUSE ENORMOUS DEALS WHICH WILL CREATE QUITE A POWER HOUSE IN PROVIDING VIDEO AND INTERNET AND TELEPHONE SERVICE TO MANY AMERICANS. TOM RUTLEDGE IS CEO OF CHARTER COMMUNICATIONS. HE WILL BE CEO AND CHAIRMAN OF THE COMBINED COMPANY. HE JOINS US NOW FROM STANFORD CT TOM NICE TO HAVE YOU THIS MORNING. THANKS FOR TAKING THE TIME. I WANT TO START ON REGULATORY. 15, 16 MONTHS AGO, BRIAN ROBERTS AND I WERE SITTING DOWN WITH ROB MARCUS TALKING ABOUT A PROSPECTIVE DEAL UNDER WHICH COMCAST WOULD ACQUIRE TIME WARNER CABLE AND AT THE TIME HE WAS HGHLY CONFIDENT THAT THEY WOULD RECEIVE REGULATORY APPROVAL. THAT CONFIDENCE WAS MISPLACED. WHY IS THE COMBINATION OF CHARTER, TIME WARNER CABLE AND BRIGHT HOUSE ONE THAT REGULATORS WOULD APPROVE IF THEY WOULDN'T APPROACH COMCAST/TIME WARNER?

TOM RUTLEDGE: WELL LOOK IT IS A VERY DIFFERENT TRANSCACTION. THE NEW CHARTER AS PROPOSED BY THIS TRANSACTION IS ACTUALLY SMALLER THAN COMCAST CABLE TODAY, LET ALONE COMCAST NBC UNIVERSAL. IT'S A SIGNIFICANTLY DIFFERENT BUSINESS. THIS IS A SIGNIFICANTLY DIFFERENT TRANSACTION. FROM A REGULATORY PERSPECTIVE, CHARTER WON'T BE VERTICALLY INTEGRATED. WE WORK WELL WITH OTHER PROGRAMMERS AND PEOPLE THINK THAT -- AND IT'S TRUE – THAT WE'LL BE OPEN-MINDED IN TERMS OF THE WAY THE MARKETPLACE DEVELOPS. WHILE I THINK COMCAST IS AS WELL FOR A VARIETY OF REASONS, WE'LL BE A SMALLER COMPANY COMMITTED TO GROWTH AND EXPANSION OF OUR PHYSICAL NETWORKS, AND I THINK THAT AS A PLACE FOR DEVELOPMENT AND CREATIVITY IN THE INDUSTRY, WE'LL BE A SOURCE OF GOOD FOR THE COUNTRY AND A SOURCE OF GOOD TO OUR EMPLOYEES AND SOURCE OF GOOD TO SHAREHOLDERS. I THINK IT'S JUST A VERY DIFFERENT TRANSACTION.

FABER: IT'S BEEN REPORTED THAT MR. WHEELER MAY HAVE APPROACHED YOU OR YOU AND TIME WARNER CABLE MANAGEMENT AT LEAST SORT OF GIVING A SENSE THAT HE WAS NOT AGAINST CONSOLIDATION. CAN YOU GIVE US ANY SENSE AS TO WHAT YOU DID HERE FOR MR. WHEELER ON THIS OVERARCHING ISSUE OF CONSOLIDATION? FRANKLY, TOM, MANY PEOPLE I'VE SPOKEN TO IN YOUR POSITION IN OTHER COMPANIES ARE NOT SURE WHERE THE LINES ARE WHEN IT COMES TO WHAT THE FCC AND DOJ ARE WILLING TO ALLOW.

RUTLEDGE: I DON'T WANT TO TALK ABOUT ANY CONVERSATIONS I HAD WITH THE CHAIRMAN, BUT IF YOU LOOK AT THE PUBLIC STATEMENTS OF THE FCC, WHAT THE FCC IS SEEKING I THINK IS BEING DEVELOPED BY THIS TRANSACTION. IT'S NOT JUST ABOUT DOING NO HARM. IT'S ABOUT BRINGING BETTER SERVICES TO THE COUNTRY AND TO CUSTOMERS AND EXPANDING THE FOOTPRINT UPON WHICH THOSE SERVICES ARE DELIVERED AND I THINK THAT THE COMPETITVE ENVIRONMENT IS ENHANCED BY US DOING THIS. IF YOU LOOK AT THE ECOSYSTEM, WHO WE ARE PLAYING WITH IN TERMS OF OTHER COMPETITORS, THEY ARE VERY LARGE. WE'LL STILL BE A RELATIVELY SMALL COMPANY COMPARED TO THE LARGE PHONE COMPANIES, COMPARED TO COMCAST, COMPARED TO THE WIRELESS COMPANIES. I THINK THIS IS GOOD FOR US. IT'S GOOD FOR THE COUNTRY. I THINK IT'S CONSISTENT WITH WHAT THE REGULATORS HAVE SAID PUBLICALLY THAT THEY ARE LOOKING FOR IN THESE KINDS OF TRANSACTIONS.

FABER: RIGHT. YOU'LL HAVE 19.4 MILLION WIRE LINE INTERNET CUSTOMERS. COMCAST HAS 22 MILLION FOR BASIS FOR COMPARISON, AT&T BELOW THAT AT 16 MILLION. BROADBAND IS THE KEY MARKET AND THE KEY PRODUCT HERE ISN'T IT TOM?

RUTLEDGE: YES. IT HAS BECOME SO. IT'S INTERESTING HOW WE AS HISTORIC CABLE OPERATORS EXPRESS OUR BUSINESS IN TERMS OF VIDEO AND STILL CALL OUR CUSTOMER RELATIONSHIPS IN TERMS OF VIDEO, BUT YOU ARE RIGHT. OBVIOUSLY, THERE ARE NEW OVER THE TOP PROVIDERS LIKE NETFLIX AND HULU, NOW HBO, WHICH WAS A TRADITIONAL CABLE PROVIDER, MOVING INTO A DIFFERENT SPACE INTO BROADBAND. AND IT'S BECOME AN ESSENTIAL PART OF A LOT OF CONSUMERS' LIVES. DOING THAT WELL AND FAIRLY AND EFFICIENTLY IS A PUBLIC INTEREST. YEAH. THE NATURE OF WHAT OUR BUSINESS IS HAS CHANGED AND THE WAY PEOPLE LOOK AT IT HAS CHANGED.

FABER: TOM, WHEN YOU WERE NEGOTIATING TO TRY TO BUY TIME WARNER CABLE SOME TIME AGO, I REPORTED THE PRICE WAS SOMEWHERE AROUND OR ACTUALLY IT WAS PUBLIC, $132 A SHARE IS WHERE YOU GET BASED ON WHERE CHARTER STOCK PRICE WAS THEN. NOW YOU ARE PAYING $195 OR EVEN MORE THAN THAT BASED ON WHERE YOUR STOCK PRICE IS. BUT EVEN MORE IMPORTANTLY, ON THEIR NUMBERS, 9.3 TIMES EBITDA. THAT IS QUITE A MULTIPLE. I'VE BEEN COVERING CABLE FOR A LONG TIME. YOU ARE PAYING A VERY VERY HIGH MULTIPLE HERE. WHY IS IT WORTH IT?

RUTLEDGE: WE THINK WE CAN MAKE THE COMPANY A LOT MORE EFFICIENT. AND THAT THROUGH TIME AND THROUGH GROWTH IN A NETWORK ENVIRONMENT, A LOT OF VALUE IS CREATED. YES, THE MULTIPLE IS HIGH RELATIVELY SPEAKING TODAY, BUT SO IS THE UP SIDE AND SO IS THE GROWTH POTENTIAL, SO IS THE ULTIMATE CROSS POTENTIAL OF THIS BUSINESS. OUR LEVERAGE WILL DECREASE RAPIDLY AND OUR MARGINS WILL DECREASE, NOT BECAUSE WE ARE GOING TO TAKE A LOT OF OPERATING COST OUT OF THE BUSINESS, BUT WE ARE GOING TO TAKE EXCESS TRANSACTIONS OUT OF THE BUSINESS.

FABER: WHAT DOES THAT MEAN, TOM?

RUTLEDGE: WELL, IT MEANS THAT WHEN WE SELL BETTER PRODUCTS, THAT THE LIFE OF OUR SUBSCRIBERS INCREASES. SO FOR THE SAME AMOUNT OF REVENUE, YOU GET LESS ACTIVITY BECAUSE YOUR SUBSCRIBERS LAST LONGER. MEANING THERE IS LESS CHURN, THERE'S LESS CONNECTS AND DISCONNECTS IN A BUSINESS. AND THOSE PHYSICAL TRANSACTIONS COME OUT OF THE BUSINESS AND REDUCE THE COST OF THE BUSINESS. IT DOESN'T REDUCE YOUR LABOR COSTS, IN FACT, YOU COULD PAY YOUR PEOPLE MORE IN THIS KIND OF ENVIRONMENT THAN YOU DO IN THE PAST BECAUSE THEY ARE ACTUALLY MORE PRODUCTIVE BY THE WAY YOU DO YOUR BUSINESS. SO GREAT PRODUCTS, GREAT SERVICE TRANSLATES INTO HIGHER MARGINS. AND HIGHER PAY, BETTER PEOPLE DOING BETTER QUALITY WORK TRANSLATES INTO LESS TRANSACTIONS, LESS SERVICE CALLS, WHICH TRANSLATES INTO HIGHER MARGINS. SO WE HAVE THE ABILITY TO BUILD A GREAT COMPANY WITH GREAT PEOPLE THAT ACTUALLY MAKES MORE MONEY BY PROVIDING BETTER SERVICE TO CONSUMERS. AND AS WE –

FABER: RIGHT.

RUTLEDGE: AND THAT'S REALLY THE KIND OF – THE GREATEST KIND OF BUSINESS SITUATION THAT CAN EXIST.

FABER: AND YOUR INVESTORS ARE AT LEAST RIGHT NOW APPLAUDING THAT POSSIBILITY. YOU ARE TALKING ABOUT $800 MILLION RUN RATE IN COST SYNERGIES. SO I WOULD ASSUME THERE WILL BE SOME LAY-OFFS, SOME OVERLAP HERE THAT WILL BE ELIMINATED BETWEEN THESE COMPANIES?

RUTLEDGE: WELL, THERE IS A LITTLE BIT OF OVERLAP, BUT THE VAST MAJORITY OF PEOPLE IN THE COMPANIES WILL NOT ONLY KEEP THEIR JOBS AND BE SUCCESSFUL, BUT THEY'LL ACTUALLY HAVE BETTER CAREER OPPORTUNITIES. OUR VIEW IS THAT WE NEED HIGH QUALITY PEOPLE. IF YOU LOOK AT TIME WARNER AND BRIGHT HOUSE, THE PHYSICAL ASSETS THAT WE'LL BE PICKING UP IN THIS DEAL HAVE 800,000 MILES, APPROXIMATELY, OF PHYSICAL NETWORK OUT ON THE STREETS AND HIGHWAYS AND BYWAYS OF AMERICA. WE NEED PEOPLE TO SERVICE THOSE THAT DON'T EXIST AT CHARTER, WHICH MEANS THE PEOPLE COMING OUT OF TIME WARNER AND BRIGHT HOUSE WHO BOTH DO THE WORK, SUPERVISE THE WORK AND MANAGE THE WORK, WILL CONTINUE TO BE EMPLOYED BY THE NEW COMPANY. AND NOT ONLY THAT, THEY'LL HAVE ADDITIONAL OPPORTUNITIES BECAUSE WE ARE GOING TO GROW THIS BUSINESS. AS WE GROW THIS BUSINESS, WE'LL CREATE ADDITIONAL OPPORTUNITIES FOR THE EMPLOYEES OF THE COMPANIES. IN ADDITION, WE BELIEVE THAT QUALITY, AS I SAID EARLIER, TRANSLATES INTO LESS COST. SO ONE OF THE THINGS THAT'S BEEN DONE IN THE INDUSTRY IS PEOPLE HAVE OUTSOURCED JOBS OVERSEAS, THEY'VE TAKEN CALL CENTERS TO OTHER COUNTRIES – INDIA, PHILIPPINES, ET CETERA. WE ARE BRINGING THOSE JOBS BACK TO AMERICA. SO ALREADY IN JUST THE LAST SEVERAL YEARS OF CHARTER WHEN I'VE BEEN HERE, WE BROUGHT 7,000 JOBS BACK TO THE COUNTRY OUT OF A TOTAL WORK FORCE WHERE WE STARTED AT 18,000 PEOPLE WHEN I CAME TO THE COMPANY. WE NOW HAVE 25,000. TIME WARNER HAS 55,000 PEOPLE. AND IF YOU LOOK AT THE SAME RATIOS OF INSOURCING THAT IS AVAILABLE, WE COULD CREATE 20,000 NEW JOBS. THAT COMES FROM OUR COMMITMENT TO QUALITY, AND OUR COMMITMENT TO TRAINING AND EMPLOYEE DEVELOPMENT. SO THE NET OF ALL THIS IS, WHILE THERE WILL BE SOME DISLOCATION IN SOME PLACES, THERE WILL BE MORE JOBS TOMORROW THAN THERE ARE TODAY.

FABER: RIGHT.

RUTLEDGE: THE OTHER PLACE JOBS EXIST, BY THE WAY IS, PEOPLE USE CONTRACTORS IN OUR BUSINESS. WE BELIEVE THAT THE BULK OF OUR EMPLOYEES SHOULD BE OUR EMPLOYEES, THAT THE TRAINING THAT WE PUT INTO EMPLOYEE DEVELOPMENT AND THE QUALITY THAT YOU CAN GENERATE FROM THAT, IN TERMS OF CUSTOMER EXPERIENCE, IS WORTH IT. AND SO WE WANT OUR PEOPLE TO BE HIGH PAID, HIGH QUALITY PEOPLE WHO PROVIDE EXCELLENT SERVICE. WE ACTUALLY THINK THAT IS A BETTER BUSINESS MODEL GOING FORWARD.

FABER: WELL, I HEAR YOU MAKING A VERY GOOD CASE TO YOUR OWN EMPLOYEE BASE AND YOUR FUTURE EMPLOYEE BASE, AND POTENTIALLY A GOOD CASE TO REGULATORS WHO WILL BE REVIEWING THIS ON THE PUBLIC SERVICE SIDE. I'M CURIOUS, WHEN IT COMES TO THAT OR WHAT NEW SERVICES, I MEAN, OVER THE TOP IS WHAT WE TALK ABOUT HERE ALL THE TIME. DO YOU SEE A DAY WHERE CHARTER WILL BE OFFERING A NATIONWIDE OVER THE TOP SERVICE SIMILAR TO WHAT WE MAY BE EXPECTING FROM OUR OWN PARENT COMPANY AT SOME POINT?

RUTLEDGE: I THINK THAT'S POSSIBLE, YES. AND THE OTHER THING THAT WE WILL BE DOING, ONE OF THE THINGS WE'VE DEVELOPED IS A NEW CLOUD BASED USER INTERFACE PLATFORM. AND WHAT THAT ALLOWS US TO DO IS ACTUALLY INTEGRATE CLOUD BASED SERVICES INTO WHAT HAVE BEEN TRADITIONALLY CABLE SERVICES. SO FOR INSTANCE, IT'S TECHNICALLY POSSIBLE TO USE CHANNEL LINEUPS OR PROGRAMMING AVAILABILITY INFORMATION AND INTEGRATE THEM ALL TOGETHER. SO LET'S SAY YOU WANT TO WATCH A SHOW LIKE "MAD MEN" WHICH JUST HAD ITS LAST EPISODE. DIFFERENT PARTIES – AMAZON MAY OWN SOME OF THOSE EPISODES, APPLE MAY OWN SOME, AMC HAS SOME – ALL OF THAT PRODUCT CAN BE INTEGRATED INTO OUR NEW USER INTERFACE THAT WILL ALLOW CUSTOMERS TO SEAMLESSLY MOVE BETWEEN OVER THE TOP AND CABLE ON EVERY DEVICE THAT THEY OWN. WE THINK THAT'S A GAME CHANGER AND WE THINK IT MAKES ALL KINDS OF PACKAGING AVAILABLE TO CONSUMERS THAT WOULDN'T OTHERWISE EXIST. AND ULTIMATELY, CONSUMERS NOW ARE DEMANDING PRODUCTS THAT ARE TAILORED TO THEM AS OPPOSED TO WHAT PROGRAMMERS AND CABLE OPERATORS WANT TO PRESENT. WE EMBRACE THAT, WE HAVE ALWAYS BELIEVED THAT PEOPLE SHOULD BE ABLE TO PICK AND CHOOSE. PEOPLE DO TEND TO BUY EVERYTHING IF IT'S PRICED PROPERLY, BUT THE WHOLE KEY IS CHOICE. AND THAT CHOICE IS DEVELOPING.

FABER: YEAH AND OF COURSE, WE EXPECT TO SEE MORE COMPETITION. TOM RUTLEDGE, THANKS FOR YOUR TIME THIS MORNING. APPRECIATE IT.

RUTLEDGE: THANK YOU. GREAT TO BE HERE. THANK YOU FOR HAVING ME.

FABER: YOU ARE VERY WELCOME. TOM RUTLEDGE, CEO OF CHARTER, WILL BE THE CHAIRMAN AND CEO OF THIS COMBINATION. OF COURSE IT COULD TAKE SOME TIME BEFORE WE SEE IT CLOSING.

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