The rumors are flying around, and they don’t all entirely agree with each other. But they all seem to agree that Comcast is about to announce a deal for TW Cable in the $44-45B range. [Followup: it’s now official with a $45.2B price tag]
TW Cable had previously rejected a bid from Charter, while rumors have swirled that Charter might tap Comcast to help out in some sort of three way deal to raise the price and win them over. In fact, a less trusting soul could see this as exactly that, even though at first blush Comcast seems to be shoving Charter out of the way. The more public, acrimonious challenge Charter seems to have been building toward is a less elegant path.
Even if this deal does get announced, it is anything but a done deal given the scrutiny regulators will give it. Comcast has to be ready to divest large swaths of TW Cable to even have a chance of winning them over. Charter and its behind-the-scenes shareholder mogul John Malone may simply have found a better way to get what they want by convincing Comcast to take point.
Yet I think they are all a bit overly optimistic about the regulatory environment. It feels to me as if a storm is coming, started by M&A forays in both wireline and wireless but perhaps worked into a frenzy by network neutrality arguments and those congressional elections that are on the menu later this year.
The argument that cable companies don’t overlap so there is no competitive issue just isn’t going to carry it off. Taken to an extreme, that path leads to a single national cable MSO in a world where cable-based internet access has already basically defeated DSL and where FTTH is only taking hold in pockets.
Beyond the cable subscriber market itself, it’s interesting to note that Comcast showed up on Vertical Systems Group’s end-of-year US Carrier Ethernet scorecard yesterday. They grew the fastest, surging past Level 3 and into the top tier for the first time. TW Cable also moved up the chart, passing XO and Cox, and that was before they closed the DukeNet deal.
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Categories: Cable · Ethernet · Mergers and Acquisitions
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No break-up fee? this looks like a complete head fake to get richer price from Charter.
Remember ATT/T-Mobile had a $5+b break-up fee. Why would TWC lock itself in an 18-24 month regulatory review with a very uncertain outcome and not demand any break-up fee conditions?
Sorry not buying it.
Fight the consolidation! We need more CableCos & TelCos…not less.
V!
dare you to stop Sprint/T-Mobile if you let this go thru
Comcast = administration friendly = approval?
certainly the perception is that CMCSA is very friendly with this WH. In fact, CMCSA’s general counsel attended Tuesday’s state dinner at the WH for France’s Hollande.
ATT was also so certain about getting regulatory approval they agreed to include a $5b break-up fee that also covered regulatory approvals in the deal. Well, we saw how well that ended up for ATT. Cost them $5+b.
This deal has no break-up fee, none!! Moreover, it will take at least 18mos to close this deal as it will not only require regulatory approval at FCC/DOJ level but also require approval from each state Public Utility Commission/Public Service Commission (PUC/PSC) each company operates in.
I find it quite bizarre and astounding that TWC would agree to tie itself up in an uncertainty-vortex for 18mos w/out demanding a break-up fee.
As I said in an earlier post, I believe this deal is a head fake designed to get Charter Communications to sweeten their offer.
Keep in mind the FCC/DOJ rejected the ATT/T-mobile deal because of concentration issues. This deal will take a potential competitor out of the market and CMCSA’s cable market share will be larger than ATT’s mobile marketshare would have been post-T-mobile acquisition. . The PUC/PSC states with overlapping subscribers will have serious concerns about taking a major cable operator out of the market.
This is by no means a slam dunk. Not only will the consumer advocates come out of the woodwork to challenge this deal, but the content community concerned about net neutrality issues post-appellate court decision will be far more vocal than ever before.
I just don’t buy this deal. It offers very little for CMCSA and doesn’t solve their biggest problem which is mobility. They desperately need a wireless asset and T-mobile is the only player left.
so does Softbank press forward now to up the ante?
Sprint is up almost 5% today
On the question of regulatory approval, keep in mind that Comcast and TWC are essentially wireline-based with little if any territorial overlap and no readily apparent interest in competing in each others’ territory. So, from the perspective of their video delivery services (as opposed to programming), an acquisition would not appreciably reduce competition. My guess is that any deal will be approved with few conditions.
Comcast could cares less about a mobility play. TWC hates Charter and wants nothing to do with them. Comcast will get LA, NYC & Dallas. Three markets necessary for growing their enterprise business. They also get leverage for negotiating programming fees and tons of operational efficiency. Comcast would target a content provider like Netflix before they would ever contemplate getting into money sucking, no money to be made, fight to the bottom, wireless business.
You make good point about enterprise business, but an asinine one about mobility.
$45b is a lot of money to enter those enterprise markets.
I disagree about negotiating leverage on programming fees b/c, given their market size, Comcast already had that. So I don’t know what, if any, incremental benefit they’ll get there.
I completely disagree that they’d target another major mult-billion dollar content provider — especially Netflix — before a mobility acquisition. What does Netflix add to Comcast that they don’t already have other than 3 Television shows — House of Lies, Orange is the New Black and Arrested Development.
The operational efficiencies you mention are certainly there in some places. But other than letting go a lot duplicative corporate functions in finance, marketing, management, HR, etc., I really wonder how much saving there is operationally with the bulk of their head count. At this level of maturity, both companies have optimized their call center solutions to the point where they can’t easily eliminate heads (or, if the case may be, use fewer outsourced resources) without degrading service.
Both companies have optimized (and continue to optimize) their local networks so not sure how much more efficiencies can be eked out there, especially when you consider that they may have to divest overlapping networks.
There will be backbone/long haul efficiencies, but $45b seems like a lot to pay for them.
Brian Roberts has made very smart creative decisions over the last 15yrs in both acquisitions and strategy. This one seems a bit blase.
Bet you TWC is kicking itself now for not insisting on a breakup fee. (And the executives and board of directors should be tossed for such an incredibly stupid decision.)
Brian Roberts boasted when this deal was announced that CMCSA doesn’t believe in breakup fees and has never agreed to one. (I looked at pre-TWC deal announcements and he was right).
If this deal falls through, however, would any acquisition target agree to that in the future?
ATT’s $5B break-up payment to T-Mobile for the failed merger gave TMUS resources to remake itself.
TWC, on the other hand, won’t receive a penny. Its board and executives should be tossed for accepting CMCSA’s no break-up fee proposal.
If this deal happens, by acquiring the TWC fiber lines in which twTelecom has IRU’s, Comcast will be in the catbird’s seat for a potential acquisition of that company.
Come to think of it, that ownership of cables on which twTelecom substantially depends may be one asset that would have to be divested before Comcast could acquire TWC.
Charter now has a golden opportunity to get a precious asset and screw Comcast in one fell swoop. Charter should aquire T-Mobile. Charter, like Comcast, has no mobile strategy. Both TMUS and CHTR are headquartered in Washington state.
It would be a very cool move with a number of cross-selling opportunities.
It would make the CMCSA/TWC deal look as meaningless as it really is.
my bad, Charter HQ’d in Connecticut.
Charter doesn’t have the money and no one cares about t-mobile. They are the Yugo or Fiat of wireless.
Charter has $8B in gross revenue, loses money every year and is saddled with over $20B in debt.
How would they possibly one up Comcast?
Comcast stuck it to them like the little hill billy bitch they are
Indeed, a combined entity with 300k fiber route miles is a real bore. (?)