Kabletown Kolossus: Comcast Buys Time Warner (Updated)
Wow, a Comcast/Time Warner merger would create a combined customer service department of well over ten employees.
— pourmecoffee (@pourmecoffee) February 13, 2014
CNBC reports: “Comcast is preparing to buy Time Warner Cable in an all stock deal worth $159 per Time Warner Cable share, according to CNBC sources. An official announcement of the deal worth $45.2 billion is expected on Thursday morning U.S. time.”
The last we checked in, Comcast had no plans to swallow Time Warner whole—instead, it was supposedly preparing to help Charter Communications make the purchase, and swallow just a few of the largest markets. Instead, the biggest cable operator in the country is getting much bigger, making Philadephia the center of the cable TV universe. Whether that remains an impressive accomplishment depends on how well the new company can fight off growing legions of “cord-cutters” who have given up cable TV in favor of Internet sources of video programming.
It also depends on whether the deal can survive the anti-monopoly scrutiny that the federal government is likely to provide before the merger is consumated
The surprise merger — expected to be announced on Thursday — is likely to bring to an end a protracted takeover battle that a smaller cable rival, Charter Communications, has been waging for Time Warner Cable, and will be the second major deal for Comcast in recent years to radically reshape the American media landscape.
Time Warner Cable shareholders will receive 2.875 shares of newly issued Comcast common stock for each of their shares. Based on Comcast’s closing price of $55.24 on Wednesday, that values each Time Warner Cable share at about $158.82 each.
The combination of the two is certain to attract antitrust scrutiny by regulators.
The reaction on Twitter was widespread, with many observers wondering, simply, how their cable service would be affected. Most of it ranged from merely cynical to outright critical.
— Jennifer Smith (@smithjenBK) February 13, 2014
How on earth is the FCC and FTC allowing Comcast to purchase Time Warner Cable???
— Amy Webb (@webbmedia) February 13, 2014
The all-stock deal will combine the two largest cable companies in America into one big, terrible cable company. http://t.co/bUQEHtUyVH
— LOLGOPMalarkey (@LOLGOPMalarkey) February 13, 2014
— Adrianna (@adriannaisms) February 13, 2014
[Update: 5 a.m.] Overnight reactions have been formed.
USA Today says the purchase is a good fit:
The deal makes sense for shareholders because Comcast’s price would also be a premium over the company’s current market value by about 18%, based on TWC’s Wednesday closing price of $135.31.
And the acquisition also is a better fit personnel-wise as Comcast CEO Brian Roberts and Time Warner Cable CEO Rob Marcus are friends. The two companies had already joined forces in August 2013 in a joint venture on improved set-top boxes.
For customers, there’s a potential for improved service, too. Comcast has spent billions on new high-tech Xfinity set-top boxes and “TV Everywhere” services.
And there’s evidence that Comcast may be also stemming the desertion of cord-cutters. Two weeks ago, it announced that the company gained 43,000 video subscribers in the fourth quarter of 2013 – when many pay TV services are seeing declines.
Gizomodo says the deal will “make big cable even worse”:
Of course, when you’re dealing with two heavyweight buffoons trying to form Voltron like this (or whatever the incompetent version of Voltron would be) in the same industry, you’re bound to run into some antitrust issues from the regulators and screams of monopolies by people like us. The powers that be will definitely have their say in this deal so even though the billions are being flashed around right now, nothing is done done yet. Remember, AT&T tried to buy T-Mobile and got shot down by the government. That could theoretically happen again.
But make no mistake, it’s clear that Comcast wants to get bigger. It’s unclear what that’ll mean for the rest of us.
Time Magazine, on the other hand, says it might end up a win for net neutrality:
As part of the deal, Comcast is expected to extend its commitment to follow the FCC’s open-Internet rules in the Time Warner Cable acquisition, according to a source familiar with the deal. Last month, a federal court struck down the FCC’s open-Internet rule — serving a major blow to Net neutrality — but Comcast had previously agreed to abide by the rules until 2018 as part of its acquisition of NBCUniversal. Net neutrality is the principle that Comcast, Verizon and AT&T shouldn’t be able to favor certain Internet services at the expense of rivals.
And, Time adds, Comcast may not try to digest all of Time Warner:
Comcast does not expect that the proposed merger would result in the combined entity having more than 30% of the market, according to a source familiar with the deal. But in order to help assuage regulators, Comcast would be willing to jettison as many as 3 million subscribers in order to make sure the new company falls below the 30% threshold. That means that Comcast could sell off a chunk of Time Warner Cable’s business to another cable company.
In some ways, then, this could be the same deal—by a different method—as the aborted venture with Charter Communications mentioned above. Originally, Comcast was going to let somebody else buy Time Warner, then grab the best pieces for itself. Now? It buys the company and sheds the part it wants least. Potato-potahto, eh?