Chairman Charlie Ergen made the comment to analysts today noting that Comcast’s proposed $42.5B acquisition of Time Warner Cable would concentrate broadband, video, and content in “a single company…That’s going to send a seismic shift across our industry in …
While he hasn’t decided whether to oppose the deal in Washington, DirecTV CEO Mike White says Comcast’s $42.5B pact to buy Time Warner Cable would result in “unprecedented media concentration in one company.” The No. 1 satellite service provider is “still assessing some of the competitive implications” but White wants to “ensure it’s appropriately scrutinized” — especially the “effective broadband monopoly they might have in two-thirds of the country.” The owner of NBCUniversal also would have a lot of power to raise content prices. That “creates some significant changes in the competitive landscape that we have to think hard about.” Couldn’t Comcast use its clout, with 30M subs after a merger, to slow the rate of increase in programming costs? Perhaps, but “it’s a complicated dynamic because that leverage may not flow through to its competitors.”
White says he’ll continue to resist high programming costs.”None of our customers have an income like those of us on the call here.” He wouldn’t comment on the state of the carriage negotiations with The Weather Channel, which went dark on DirecTV in January, but says that his company “may have lost a few thousand customers in the first quarter” due to the dispute. “Fundamentally I continue to believe if your viewership goes down ….that should be reflected in the price.”
Time Warner Cable execs sounded pretty darn sure of themselves last week when they told investors that they believe Comcast’s $42.5B acquisition agreement will fly in Washington and benefit shareholders. But the No. …
Hell still hath few furies like a shareholder with legal representation feeling scorned. In what seems to be the first but most likely not the last such legal move, a Time Warner Cable shareholder has launched a potential class action suit against the company to halt its acquisition by Comcast in a $45.2B all-stock deal. Filing in the Supreme Court of New York (read it here) one day after the TWC-Comcast deal was formally announced on February 13, Breffni Barrett is accusing TWC, its chairman and CEO Rob Marcus, former Sen. John Sununu and other members of the company’s board of cutting themselves a sweet deal and breach of fiduciary duty. The shareholder also says in the action, which also names Comcast as a defendant, that the mega-merger risks regulatory wrath. Of course, while it is easy to file an action such as this one, it is very hard to prove that a board acted as badly as Barrett alleges — especially when it had its own teams of lawyers going over every detail before anything was made public. Additionally, the merger is subject to approval by shareholders from both companies as well as a careful look from both the FCC and the Department of Justice. Put together, those facts mean there is little chance of Barrett’s filing stopping much of anything.
In this week’s podcast, Deadline Executive Editor David Lieberman and host David Bloom kick the tires from several perspectives on that $45 billion Comcast-Time Warner Cable merger that would remake the cable industry. What will it mean for the cable industry, Hollywood and consumers? And what are its prospects for winning regulatory approval?
The Davids also check in CBS’s red-hot quarter and continued optimism on retransmission fees despite the big cable merger; welcome the long-in-coming videogame industry revival; and engage in shameless speculation about the latest reports of an Apple set-top device, and whether it might survive the Time Warner-Comcast merger.
Let’s not overthink Brian Roberts‘ rationale for engineering Comcast‘s $45.2B all-stock deal today to buy Time Warner Cable. I don’t think he did it, as some observers say, primarily because he’s concerned about the falling number of cable video subscribers, the threat of competition from phone and satellite companies, or to help resist rising programming costs. Roberts pulled the trigger because he could pick up some of the country’s most important cable systems — including Manhattan and parts of Los Angeles — without having to write a check. The deal will be virtually tax free. And his power will be secure even after TWC shareholders own 23% of Comcast’s Class A shares. Roberts controls the company’s Class B shares which have 15 votes apiece, enabling him to cast a third of all votes. The deal was almost a no-brainer: Roberts keeps Charter Communications and its largest shareholder, Liberty Media’s John Malone, from becoming rival industry powers. And he scores TWC’s 11M subscribers, 52 news and local programming channels (including New York’s NY1), and two regional sports networks in Los Angeles. In addition to NYC and LA, TWC has substantial franchises in large markets including Dallas, Kansas City, Milwaukee, Cleveland, Cincinnati, Buffalo, Rochester, Hawaii and most of the Carolinas. They complement Comcast’s holdings in Philadelphia, Northern California, Houston, Minneapolis, Boston, Seattle, and Miami.
Analysts may feel Comcast‘s just announced $45.2B all-stock deal to purchase Time Warner Cable is a good bet, but there will certainly be more than a few voices coming out against the mega-merger. One of the first to formally oppose the deal is the Parents Television Council. The sometimes controversial and always vocal advocacy group today said the deal “will invariably be anti-consumer and anti-family” in a statement. While the PTC is known for coming out against the TV rating system, on-air profanity and content, the group also has been consistent in its opposition to cable bundling — the source of its issues with the TWC-Comcast deal. “A horizontally and vertically integrated Comcast/Time Warner Cable entity would wield calamitous market leverage over consumers,” PTC president Tim Winter said today in a statement. “Unless and until Comcast – or, for that matter, any other potential suitor of Time Warner Cable – agrees to allow customers to choose and pay for only the cable networks they want coming into their homes, the Parents Television Council will vehemently oppose any such merger.”
The PTC has long advocated cable unbundling as part of its agenda, with the argument that the present system “forces families to underwrite explicit content.” The group isn’t the only one against bundling: Last May, Sen. John McCain introduced The TV Consumer Freedom Act of 2013 to, in part, end bundling, though that effort has been quiet since. Regardless, Comcast and TWC as well as investors will have to wait for a potentially long regulatory approval process from the FCC and the DOJ.
This is the question that will determine whether the companies can close their $45.2B deal. It will collapse in Washington if Comcast and Time Warner Cable can’t persuade FCC commissioners and, to a lesser degree, antitrust regulators that the No. 1 cable operator and owner of NBCUniversal won’t have too much power to determine industry winners and losers, and set prices, if it also owns the No. 2 cable company. Execs hope to head that off by arguing that pay TV is highly competitive, and by making some specific promises upfront. For example, Comcast says today that it will extend to Time Warner Cable systems the net neutrality commitment it made to win FCC approval for the NBCU acquisition. It vows to offer “affordable standalone broadband service” in TWC territories. Comcast says that TWC’s regional sports and local news channels will be available to other pay TV distributors at reasonable prices with a right to arbitration in case of a dispute. And it will expand public interest programming including local news and children’s fare, and will guarantee carriage of non-commercial educational TV stations even if they give up their broadcast spectrum — something the FCC wants to reclaim and auction to wireless broadband providers. “In today’s market, with national telephone and satellite competitors growing substantially, with Google having launched its 1 GB Google Fiber offering in a number of markets across the country, and consumers having more choice of pay TV providers than ever before, Comcast believes there can be no justification for denying the company the additional scale that will help it compete more effectively,” EVP David Cohen says.
PHILADELPHIA and NEW YORK – (February 13, 2014) – Comcast Corporation (Nasdaq: CMCSA, CMCSK) and Time Warner Cable (NYSE: TWC) today announced that their Boards of Directors have approved a definitive agreement for Time Warner Cable to merge with Comcast. The agreement is a friendly, stock-for-stock transaction in which Comcast will acquire 100 percent of Time Warner Cable’s 284.9 million shares outstanding for shares of CMCSA amounting to approximately $45.2 billion in equity value. Each Time Warner Cable share will be exchanged for 2.875 shares of CMCSA, equal to Time Warner Cable shareholders owning approximately 23 percent of Comcast’s common stock, with a value to Time Warner Cable shareholders of approximately $158.82 per share based on the last closing price of Comcast shares. The transaction will generate approximately $1.5 billion in operating efficiencies and will be accretive to Comcast’s free cash flow per share while preserving balance sheet strength. The merger will also be tax free to Time Warner Cable shareholders.
Brace yourself for a bitter fight over media conglomeration: The No. 1 cable company and owner of NBCUniversal has a deal with Time Warner Cable to buy it for stock valued at $159 a share, beating Charter Communications’ $132.50 cash-and-stock bid, CNBC’s David Faber reports at the news channel’s website. The deal is set to be announced tomorrow morning, he says. (Comcast owns CNBC.) Each share of TWC, which closed today at $135.31, would be exchanged for 2.875 Comcast shares, which closed at $55.24. That would translate into about $44.2B (not including debt) vs. Charter’s $37.4B bid, which TWC rejected as inadequate. If consummated, a deal would add TWC’s 11.2M video subscribers to Comcast’s 21.7M and give the cable colossus coveted franchises in Manhattan and Los Angeles.
Is this one of the products that Apple CEO Tim Cook has promised will wow consumers and investors this year? The electronics company is negotiating with the No. 2 cable operator and others who can feed content …
This should add some excitement to Time Warner Cable‘s next shareholders’ meeting. Charter has several highly regarded cable execs — including former TWC Chief Technology Officer Jim Chiddix, former Charter CTO Marwan Fawaz, and Oxygen Media co-founder Lisa Gersh – in its collection of independent candidates for the No. 2 cable company’s board. They’d support Charter’s $61.3B (including debt) cash and stock takeover offer. In addition, Charter hopes to head off efforts by TWC to adopt anti-takeover protections. It proposes to fix the size of the board at 13 and repeal any by-law amendments made without shareholder approval since July 26, 2012, the last time TWC disclosed any change to its by-laws. “It is clear from our meetings with Time Warner Cable shareholders that there is an overwhelming desire to combine these two companies to increase Time Warner Cable’s competitiveness,” says Charter CEO Tom Rutledge. “Our purpose in this proxy contest is to enable shareholders of TWC to raise their voice, and to provide a very capable board who will hear them.” TWC says that Charter made a “grossly inadequate” bid by offering the equivalent of $132.50 a share; TWC considers $160 closer to the mark. “It is clear that Charter is nominating a slate of directors for the sole purpose of pressuring our Board into accepting the same lowball offer that it previously considered and unanimously rejected,” TWC chief Rob Marcus says. “Our Board remains focused on maximizing shareholder value. We are confident in our strategic plan, which was detailed publicly on January 30, and we are not going to let Charter steal the company.” TWC shares opened this morning up slightly at $136 — suggesting that investors believe that Charter, or someone, will offer more.
Here are Charter’s candidates for the TWC board with its description of their backgrounds and qualifications:
UPDATE: Time Warner Cable Offers A Free Movie To LA-Area Customers As Make-Good After Super Bowl Outage
UPDATE, 6:30 PM: The cabler said tonight that it is offering a “gift of appreciation” to SoCal subscribers whose signal went out for more than an hour during Sunday’s Big Game. But will credit for one free VOD movie — or a five-buck gift card for analog subs — placate disgruntled football fans and party hosts? “Although most of our customers didn’t experience an interruption, we want to express our sincere apologies to all Time Warner Cable TV customers in the Los Angeles area,” SVP Operations Deborah Picciolo said in a release. “We didn’t live up to our standards for a quality customer experience. We know there’s no way to undo the inconvenience of last night’s outage, and we want them to know how truly sorry we are for this issue.”
PREVIOUSLY, Sunday PM: Some Time Warner Cable customers in Southern California who weren’t watching the Big Game in high def missed out on parts of the Super Bowl and Bruno Mars-Red Hot Chili Peppers halftime show, TWC confirmed Sunday evening. (If you missed the halftime show, here’s Mike Fleming’s recap.)
In this week’s podcast, Deadline’s executive editor David Lieberman and host David Bloom catch up on the many highlights from earnings season announcements, beginning with those by possible dance partners Comcast and Time Warner Cable and what their news might mean for Comcast’s takeover bid. They also take the market temperature on Viacom and tech giants led by Google — which sold off its Motorola Mobility unit after owning it just two years — and Facebook, Apple, Yahoo and Amazon. They also look at exhibitors’ demands for shorter movie trailers and whether studios will play along.