Recent reports claim that Comcast has finally reached an agreement to buy Time Warner Cable in a $45.2 billion deal that will create by far the biggest cable company in the United States.
As Reuters writes, “the cable provider will boast a footprint spanning from New York to Los Angeles with a near-dominant position in broadband Internet which may raise the hackles of anti-trust regulators.”
The deal, which would put the company in 19 of the nation’s 20 largest TV markets, could give it unprecedented leverage in talks with content providers and advertisers.
“A deal may face a fierce battle in Washington as you are merging the two largest cable operators,” Janney analyst Tony Wible said in a research note.
He went on, adding while two companies that have signed the deal don’t directly compete in any markets and could help consumers by keeping programming costs in check, “the government could still object and may be more concerned about one company controlling so much of the country’s broadband infrastructure.”
Thursday announcement comes as a surprise after months of speculations about Time Warner Cable by smaller rival Charter Communications Inc, and immediately raised questions as to whether it would pass the scrutiny of regulators.
Comcast is reported to pay $158.82 per share, which is roughly what Time Warner Cable demanded from Charter.
“Comcast, which argued that the deal would be beneficial to consumers in that it would roll out its more advanced cloud-based set-top boxes to Time Warner Cable customers, said it would also eventually result in higher broadband speeds,” Reuters claim.
“We have a lot of experience integrating cable assets and are confident upon closing of the transaction, we can put these companies together quickly and efficiently,” Comcast Chief Executive Brian Roberts revealed to analysts in an interview.
The duo of the companits is expected to create $1.5 billion in operating savings, with 50 percent of those savings expected in the first year.
Comcast definitely has interest in synergies it will get whenowning the New York City market as well as the opportunity to expand its business services unit, its fastest growing cable division, to a larger footprint.
“For Comcast, adding New York and Los Angeles has advertising potential, along with Time Warner Cable’s sports assets, which provides an acquisition target that is simply too compelling to ignore, especially with an (under-leveraged) balance sheet,” said BTIG analyst Rich Greenfield.
The parties of the Thursday agreement are concentrated in different cities. Comcast would fill in its New Jersey and Connecticut portfolio with Time Warner Cable’s New York City customers, for instance, and add major markets such as Los Angeles and Dallas.
“Significantly, it will not reduce competition in any relevant market be because our companies do not overlap or compete with each other,” Roberts said. “In fact, we do not operate in any of the same zip code.”
“We spent a lot of time thinking about it. It’s a really special transaction for both Time Warner Cable and for Comcast, for shareholders, employees, and mostly for our customers. The deal is pro-competitive, pro-consumer, we’re going to be able to bring better products, faster internet, more channels, On Demand, TV everywhere, and a national local platform that’s really special. So we’re optimistic that we can get this approved.”