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Time Warner Cable should talk to Charter, T. Rowe says

By Liana B. Baker and Soyoung Kim

Jan 23 (Reuters) - A Time Warner Cable Inc investor that also has a large stake in would-be predator Charter Communications Inc is urging Time Warner Cable to talk to its smaller rival, after weeks of Charter's aggressive campaign to win over investors.

T. Rowe Price Group, Charter's third-largest shareholder with a stake of more than 5 percent, this week wrote to Time Warner Cable, urging the No.2 cable company to have talks with Charter about a possible deal, according to people familiar with the matter.

With the letter, Charter, which has been on a roadshow meeting with Time Warner Cable shareholders for the past two weeks, may be seeing the first fruits of its campaign to rally investors to support its $37.3 billion offer. Time Warner has insisted the Jan. 13 bid was inadequate.

"Charter has asked Time Warner Cable shareholders to approach Time Warner Cable management and board. This letter is consistent with that," said ISI analyst Vijay Jayant.

As of Sept. 30, T. Rowe owned 5.16 percent of Charter shares and 2.3 percent of Time Warner Cable shares. T. Rowe is Time Warner Cable's eighth-largest shareholder and Charter's third-largest shareholder, the latest publicly available filings show, according to Thomson One.

Besides T. Rowe, there is only one other investor, the Vanguard Group, that has a top 10 ownership position in both cable companies. Vanguard is Time Warner Cable's No.2 shareholder with a 5.01 percent stake and is also Charter's No.5 shareholder with a 3.31 percent stake, according to latest filings.

Members of Time Warner Cable's board have read the T. Rowe letter, but their reaction was not immediately clear, according to the people familiar with the matter.

It also wasn't known whether T. Rowe was urging Time Warner Cable to consider a deal at a specific price.

Representatives from Charter, T. Rowe Price and Liberty Media declined to comment. A spokeswoman from Time Warner Cable said, "Time Warner Cable has an active, ongoing dialogue with many of its shareholders."

T. Rowe has a history of activism in the cable industry. In 2007, it opposed a buyout of Cablevision by the controlling shareholder, the Dolan family. The Baltimore-based asset management firm was also an influential opponent of Michael Dell's initial offer to buy out Dell Inc last year.

Charter, backed by billionaire John Malone's Liberty Media Corp, announced its $132.50 per share bid for Time Warner Cable on Jan 13, which the larger rival promptly rejected as too low. Time Warner Cable responded that it was open to a deal at $160 per share.

Most investors expect any higher bid from Charter will fall short of Time Warner Cable's asking price, raising the specter of a proxy battle. Charter has until Feb. 15 to nominate a slate of directors if it wants to go that route.