Mega-merger would unite Comcast, Time Warner Cable
Comcast unveiled plans Thursday to swallow Time Warner Cable in a deal uniting the two largest US cable operators, triggering calls to block the creation of a sector superpower.
News of the $45.2 billion deal raised regulatory concerns about the reach of Comcast, which owns NBCUniversal's film and television assets and is one of the largest providers of cable Internet.
Comcast chairman and chief executive Brian Roberts said the plan would allow Comcast to deploy new technologies for delivering streaming content and use the Internet cloud, with greater efficiency.
The companies said that by combining they could save $1.5 billion in operating costs as it brings out new services and products.
The mutually agreed merger is a triumph for Comcast over its rival Charter Communications, the nation's fourth largest cable operator, and Liberty Media Corp, its biggest shareholder.
The deal represents an offer of $158.82 per share, about $23 above where TWC has been trading and comfortably above Charter's offer of $132.50 a share, which was rejected as too low.
Comcast is already a dominant force in cable with nearly 22 million video subscribers
Time Warner Cable, which was spun off as an independent company in 2009 from the Time Warner media-entertainment conglomerate, has 12 million.
The companies said their merger agreement is subject to shareholder approval at both companies and to regulatory review.
But the news immediately raised concerns about the creation of a dominant force which spans cable, Internet and the content flowing over the networks.
John Bergmayer at the consumer activist group Public Knowledge urged antitrust authorities and the Federal Communications Commission to block the deal.
"If Comcast takes over Time Warner Cable, it would yield unprecedented gatekeeper power in several important markets," he warned.
He said an enlarged Comcast "would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks ... and distributors."
Craig Aaron at the advocacy group Free Press raised similar concerns, saying the deal would give Comcast a dominant share of the US pay-TV market and "triple-play" market for video, voice and Internet service.
"Americans already hate dealing with the cable guy... But this deal would be the cable guy on steroids -- pumped up, unstoppable and grasping for your wallet," Aaron said.
Comcast said that in order to address competition concerns, it is prepared to divest systems serving about three million subscribers, leaving a net gain of approximately eight million.
That would bring Comcast's managed subscriber total to roughly 30 million, the company said.
Analysts said regulators may approve the deal but impose conditions.
"While we see no fundamental barrier to deal approval, conditions may be placed on the combined company to amplify and extend the types of conditions that were placed on the Comcast-NBCU deal in 2010 aimed at fostering online and video competition," said RBC Capital Markets analyst Jonathan Atkin.
The 2010 merger required Comcast and NBCU to provide its content to other video providers at non-discriminatory prices, not discriminate against rivals through its set-top boxes and not take steps to restrict the distribution of its programs and films.
Mike McCormack at Jefferies said the divestment of some cable operations "should alleviate some concerns" by regulators.