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Charter Communications Inc. (CHTR - Free Report) , the second-largest cable MSO (multi service operator) in the U.S., recently entered into a share warrant agreement with ARRIS International plc. (ARRS - Free Report) . ARRIS is the leading customer premises equipment (CPE) manufacturer for the cable TV industry. In Jul 2016, it completed a similar deal with Comcast Corp. (CMCSA - Free Report) , the largest domestic cable MSO.

Per the deal, Charter Communications has the right to purchase up to 6 million shares of ARRIS’ stock by 2018 end. Through 2016 and 2017, the strike price for ARRIS’ stock is set at $28.54 per share. In 2018, the price will be determined using a formula based on the company's trading performance at the time.

At present, ARRIS will make a certain number of shares available to Charter Communications only after the cable MSO purchases a specific volume of ARRIS products and services. Of the total purchase, a significant portion must come from the Network & Cloud segment of ARRIS. The entire agreement expires on Sep 30, 2023.

Traditionally, cable operators like Charter Communications have been dependent on hardware-based infrastructure for their services. With the increasing demand for new Internet-based services for retail and business customers, it will become tougher for cable operators using hardware infrastructure to meet demand in the future. However, ARRIS’ software-based solutions will help Charter Communications achieve scalability, agility and operational cost savings.

Importantly, Charter Communications has announced that it will foray into the wireless market. The company will activate its MVNO (mobile virtual network operator) agreement with Verizon Communications Inc. (VZ - Free Report) , which was taken over after the acquisition of Time Warner Cable. It will also install several WiFi hotspots across cities to expand its wireless network. Charter Communications currently carries a Zacks Rank #4 (Sell), while ARRIS has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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