Comcast-Time Warner Cable deal would create formidable giant
Comcast Corp.’s $45.2-billion stock deal for Time Warner Cable would create a media juggernaut with revenue approaching $100 billion and more than 30 million customers, including more than 1.5 million in the Los Angeles metropolitan area.
“We view this as a merger that creates a company on the leading edge of innovation, a company committed to investing in networks, products and services that deliver the customer the best possible experiences,” Comcast Chief Executive Brian Roberts said on a call with Wall Street analysts.
The marriage would give Comcast more programming as well. Already the parent of NBCUniversal, whose holdings include NBC; Universal Pictures; the MSNBC, CNBC and USA cable channels; as well as national and local sports channels, Comcast would take charge of Time Warner Cable’s programming assets — including two Los Angeles sports channels and a very popular all-news channel in New York City.
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It also has media watchdogs and consumer activists crying foul, and warning that a Comcast-Time Warner Cable pairing would radically reshape the media and telecommunications landscape and could thwart competition.
Comcast’s proposal comes as the cable industry faces increased competition not only from phone companies and technology giants such as Google and Apple but also new digital content providers such as Netflix and Amazon.
Based on Wednesday’s closing price, Comcast is paying the equivalent of $158.82 a share for Time Warner Cable, whose stock closed at $144.81, up $9.50, or 7%, on Thursday. Comcast has offered 2.875 shares of its stock for each share of Time Warner Cable in the all-stock transaction. Comcast’s stock closed Thursday at $52.97, down $2.28, or 4%.
The merger will face regulatory review by the Federal Communications Commission and probably the Department of Justice.
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“An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content,” said John Bergmayer, a senior staff attorney with Public Knowledge.
Former FCC Commissioner Michael Copps said the deal is “so over the top that it ought to be dead on arrival at the Federal Communications Commission.”
Copps, who now serves as an advisor to Common Cause, said the combination “runs roughshod over competition and consumer choice and is an affront to the public interest.”
Comcast executives countered that its acquisition of Time Warner Cable does not run afoul of any current regulations, and since neither company competes head-to-head anywhere, the merger wouldn’t be anti-competitive.
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“Putting these two companies together will not deprive a single consumer in America of a choice he or she has today,” said Comcast Executive Vice President David L. Cohen, who added that the conditions Comcast agreed to when it acquired NBCUniversal in 2011 are in effect until 2018 and “more than adequately address any potential competitive concerns.”
Although there are no caps on how many subscribers a multichannel video program provider can reach, Comcast said it would sell off cable systems serving up to 3 million subscribers so that it remains under 30% of the nation’s pay-TV market. The 30% benchmark was the previous FCC cap on cable ownership, until a federal court tossed out that rule in 2009.
As for worries about a Comcast-Time Warner Cable using its Internet pipes to slow competition and favor its own content, Comcast’s Cohen stressed that as part of its NBCUniversal consent decree, it must obey the FCC’s Open Internet Order — even though a federal court recently vacated those rules.
The fact that Comcast and Time Warner Cable are not direct competitors doesn’t ease the worries of many who fear the size of the combined entity, and its potential ability to block other video and Internet providers from the marketplace.
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“The aggregated might of the two companies together makes it even more unlikely that any competition will emerge on its own,” said Susan Crawford, a visiting professor at Harvard Law School and author of “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.” “No one else is going to build a wire that might provide cheaper and better service to homes and businesses that are already served by this entity.”
Comcast has a lot of clout in Washington, having spent $18.8 million on lobbying in 2013, the seventh most by any company or trade association, according to the nonpartisan Center for Responsive Politics. And one of Comcast’s lobbyists is former FCC Commissioner Meredith Attwell Baker.
The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights has indicated it will hold a hearing to review the deal. The FCC and Justice Department declined to comment.
But Comcast’s Cohen said the company is hopeful that it can get through the regulatory process and close the sale by the end of the year.
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Time Warner Cable initially approached Comcast about a deal more than a year ago. At that time, Comcast was still knee-deep in integrating NBCUniversal and showed little interest in taking on the headaches of another big acquisition.
That changed in recent weeks when another cable operator — Charter Communications — made a play for Time Warner Cable. Last month, Charter’s $132.50-a-share offer for the cable company was rejected.
But Charter was pushing ahead anyway and preparing for a proxy war. It was also talking with Comcast about forming a partnership to buy Time Warner Cable.
Those talks fell apart in recent days over the structure of a deal. Comcast then opted to go alone, which caught Charter off guard.
Comcast’s move has ignited speculation among Wall Street analysts about further consolidation in the media and telecommunications industry, including satellite operators Dish and DirecTV as well as wireless companies Sprint and T-Mobile and cable companies such as Cox Communications and the jilted Charter.
Times staff writers Jim Puzzanghera in Washington and Ryan Faughnder in Los Angeles contributed to this report.
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