Light Reading

Comcast Strikes $45B Deal for TWC

Ray Le Maistre
2/13/2014
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Comcast has trumped Charter by striking a $45 billion deal to acquire Time Warner Cable Inc. (NYSE: TWC). (See Comcast to Buy Time Warner Cable for $45.2B .)

Charter Communications Inc. has been courting TWC for months and in January made a cash and stock bid worth $132.50 for each TWC share in January, which was rejected.

And just days ago, Charter even unveiled how it would reshape the TWC board if it was eventually successful in its takeover bid. (See Charter Seeks to Replace TWC Board .)

Now, Comcast Corp. (Nasdaq: CMCSA, CMCSK) has stepped up with an all-stock bid that values each TWC share at $158.82, an offer that has been accepted.

The consensus appears to be that Charter would not have the financial muscle to make a better offer.

Comcast seems confident its deal wouldn't fall foul of anti-competition rules as its service areas don't overlap with those of TWC. Such a deal would, though, leave Comcast way ahead of the field as the number one player in the US cable services market, and leave Charter wondering what to do next.

Expect to hear more about this game-changing M&A move during Thursday.

— Ray Le Maistre, Editor-in-Chief, Light Reading

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kq4ym
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kq4ym,
User Rank: Light Sabre
2/13/2014 | 9:30:24 PM
Re: The Litmus Test
While the consumer may not feel the effects immediately, it's not going to be smooth sailing for those who will be left with no competitive services to choose from. Whether the government will decide in favor of the deal is another matter. But, recent approvals seems to indicate there may be no objection. It will be history that decides the wisdom of large companies taking what actually amounts to a monopoly interest.
dwx
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dwx,
User Rank: Lightning
2/13/2014 | 3:57:17 PM
Re: The Litmus Test
TWC and Comcast were two of the most staunch opponents to giving OTT providers free access to their networks, so in those regards not much changes.   They just have a bigger bargaining chip with more customers, and I agree it's the content owners who are going to make the most noise over this.  

I'm curious if Comcast plans on keeping ahold of the entire TW footprint or selling off portions to other MSOs who have adjacent footprints.  

Comcast is ahead of the game when it comes to true IP video.  I think it's a win for TWC subscribers if they will have access to Comcast's newer video products, well at least those looking for more cutting edge products.  Most are like my parents and just want their TV to work without much hassle. :) 
mendyk
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mendyk,
User Rank: Light Sabre
2/13/2014 | 1:10:30 PM
Re: The Litmus Test
The Rule of 3 (as in the number of mobile operators a market can support) has proven out time and again in lots of national markets. So one way or the other, past performance indicates that if T-Mobile and Sprint don't come together, one of them will fall away or at least fade into Tier 3 status (as in, "Our customer base is now made up entirely of people who read The Nation"). Pro-competition fans don't like that but it's just the way things have worked and most likely will continue to work. Our regulators seem to be completely oblivious to this established reality.
brookseven
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brookseven,
User Rank: Light Sabre
2/13/2014 | 12:53:27 PM
Re: The Litmus Test
Dennis,

I agree with your point here, which is essentially that the consumer landscape does not directly change.

What I think does change are the eco-systems around this which folks have been directly commenting on.  

The wireless merger is backwards and my big concern with NOT doing it is do T-Mobile/Sprint survive separately?  I love the notion of a 4 player field, but a 3 player field with long term survivability seems better to me.

Back to the eco-system thing, I think shareholders will win in the long term since this is essentially a land grab.  There will be short to medium term losses but essentially we will scrap 1 G&A department, some executives, and get a better deal on purchasing in NewCo.  I think that the notion of the single largest ISP by quite a long way is troubling.

seven

 
mendyk
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mendyk,
User Rank: Light Sabre
2/13/2014 | 11:45:01 AM
Re: The Litmus Test
On the positive side, this can only help to accelerate the move to OTT.
mendyk
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mendyk,
User Rank: Light Sabre
2/13/2014 | 11:42:16 AM
Re: The Litmus Test
Yes, that's what economies of scale is all about. In reality, merged companies have a very hard time actually getting to the point where their efficiency plans come to fruition. And we are in an economic environment that cares not one whit about individual job security, merger or no merger. I'll go back to the original point -- single ownership of properties that already are de facto monopolies (as in, there's little or no on-the-ground competition between cable operators) won't have much of an impact on the video/broadband market.
Phil_Britt
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Phil_Britt,
User Rank: Light Beer
2/13/2014 | 11:41:11 AM
Re: The Litmus Test
A financial analyst pointed out that the biggest complaints may not come from consumers or from other cable/satellite providers, but instead from content providers like CBS and Disney. With Comcast/NBC/Time Warner all together, it would be the behemoth in content and have the majority of the distribution capability as well.
craigleddy
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craigleddy,
User Rank: Blogger
2/13/2014 | 11:35:03 AM
Re: The Litmus Test
Oh, I thought I was being polite by saying "nonsense" and not something harsher. :) I guess I've witnessed too many merger announcements containing false promises.

Comcast and TWC are indeed both pursuing this centralization strategy, but the merger could take it to an even larger scale with potential impact on more employees, unless that non-overlap promise is put in stone.

 
mendyk
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mendyk,
User Rank: Light Sabre
2/13/2014 | 11:24:28 AM
Re: The Litmus Test
Are you saying that they wouldn't do this without the merger? I'm not sure where the nonsense crack comes from -- seems a bit harsh.
craigleddy
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craigleddy,
User Rank: Blogger
2/13/2014 | 11:19:11 AM
Re: The Litmus Test
Au contraire on the point about employees and consumers.

The notion that Comcast and TWC properties will be operated separately without overlap is nonsense (unless their non-overlap promises are codified by regulators). One of the key strategies of Comcast (and TWC) in embracing IP-based distribution is to centralize operations in as few locations as possible, essentially around content delivery networks (CDNs) and regional data hubs. Carried out on a larger national scale this significantly reduces the need for local operations and employees.

The IP strategy also poses enormous operational challenges (billing, customer service, provisioning etc) which, if done on an even larger scale and not executed properly, will rain down on customers' heads. (Not to mention that the easiest way for a large broadband provider to increase revenue is through rate increases.) Comcast's IP vision is brilliant but the company still has issues with execution, as far too many Comcast customers know.    
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