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Why compete when you can just merge and name you own prices?

Comcast Corp. (CMCSA) is expected to on Thursday officially announce a mind-blowing deal, which would mark the biggest consolidation in over a decade in the cable television and broadband internet market, if allowed.  Comcast's bid will reportedly slot in at $159 USD per share of Time Warner Cable (TWC) stock, making the deal worth just over $45 billion. 

Bloomberg, Reuters, and The New York Times are all reporting that the deal will be announced tomorrow.  And most tellingly, NBC News -- whose parent company is owned by Comcast -- also is reporting the deal will become official on Thursday.

The deal would create a market behemoth, merging together the first and second place competitors in both the TV and broadband internet markets.

Comcast has roughly a 25 percent share of the broadband market; TWC controls around 12 percent of the market [source].  Comcast currently controls roughly 19 percent of subscription cable TV market; TWC controls around 9 percent of it.  Together the pair would control roughly a third (37 percent of broadband; 28 percent of cable TV) of two vital U.S. communications markets.

On a local scale the deal would be a massive win for Comcast and a massive loss for consumers, who would see scarce competition (Time Warner Cable vs. Comcast) reduced to none.

Comcast Cable

In all likelihood the deal will face lawsuits from the U.S. Federal Communications Commission (FCC) and the U.S. Department of Justice (DOJ) on antitrust grounds.  The Motley Fool writer Anders Byland wrote about this possibility back in November 2013, when the bid was just a rumor.  He titled his piece "The Time Warner and Comcast Merger Can't Happen. Here's Why."

In it he writes:

I would advise you not to hold your breath awaiting this business combination. Here's why.

Having Time Warner join forces with Comcast would create a massive cable operator. I mean an industry giant of epic proportions. Comcast serves nearly 22 million video subscribers, and Time Warner is No. 2 in the cable TV industry, with more than $11 million customers. The third-largest cable service provider is Cox Communications, with just 5.4 million households to its name.

You see the problem, right? In a total TV service market of 116 million households, including satellite subscribers and rabbit-ear antennae, Comcast wants to grow its market share from 19% to 28% in one fell swoop.

I don't think our regulatory bodies are going to like that idea.

Comcast's deal -- which it plans to do with all stock and no cash -- is slightly less than than the $160 USD/share price that TWC customers were targeting.  But it's much better than $133 USD/share from Charter Communications Inc. (CHTR), an offer which TWC rejected in mid-January.  That deal would have perhaps stood more of a chance with regulators, though, given that Charter actually has fewer subscribers than TWC (or Comcast).

Time Warner Cable
[Image Source: Reuters]

Unless federal regulators are asleep, this deal will almost certainly face far stiffer opposition.  Comcast isn't exactly best friends with the FCC, which will likely work against it.  The broadband provider famously fought to kill federal regulators' net neutrality rules in an appeals court.

Sources close to Comcast say it will divest 3 million cable subscribers (or about a tenth of the combined company's subscriptions).  That's a small gesture, but it's probably not even on par with the measures AT&T, Inc. (T) was willing to concede to had the DOJ and FCC agreed to allow it eliminate/gobble up its competitor T-Mobile USA (a Deutsche Telekom AG (ETR:DTE) subsidiary) in a similar deal.  And we all know how that story ended...

Sources: NBC News, Bloomberg, Reuters, The New York Times

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Can you spell near monopoly?
By superPC on 2/13/2014 6:24:11 AM , Rating: 2
Time Warner wasn't even in a bad shape. It's a profitable company. Why would it want to sell itself? It doesn't need massive capital influx to increase costumer. Slow and steady wins the race they say.

Selling means loosing some of TWC employee.

Seriously, why sell?

Guess I'll never be a CEO than.

RE: Can you spell near monopoly?
By DiscoWade on 2/13/2014 8:27:01 AM , Rating: 3
So a sorry cable company is being bought by the sorriest cable company. I hope the Feds nix this faster than you can count to 1. Or, force the cable and internet side of the company to break up and be seperate.

It is times like this that I am glad my cable company is a smaller carrier. I just hope the beast doesn't set their eyes on my cable company.

RE: Can you spell near monopoly?
By DiscoWade on 2/13/2014 8:27:40 AM , Rating: 2
(EDIT: "separate" NOT "seperate". Stupid spelling error.)

RE: Can you spell near monopoly?
By Flunk on 2/13/2014 9:07:16 AM , Rating: 2
Don't worry, you always have the option to not have cable at all. I'm beginning to think that's the only reasonable option.

RE: Can you spell near monopoly?
By KentState on 2/13/2014 9:55:38 AM , Rating: 2
Well, there is satellite or the offerings from the phone companies. My biggest issue is not the delivery of cable, but the fact that Comcast owns the content. To me, that would be like the car companies owning the oil companies and then making vehicles that get 1 MPG.

How much more content will Comcast own after this? Will this cause issues with D*TV, Dish, Uverse and FiOS being able to provide content on the same playing field.

By Reclaimer77 on 2/13/2014 9:45:26 AM , Rating: 2
Not saying I support the sale, but 28% of the market is hardly a near monopoly.

As far as why sell, well that's easy, people stand to make a fortune from it.

Wait they're not the same company??
By uminatsu on 2/13/2014 12:50:03 AM , Rating: 2
I had always assumed they were the same company or belonged to the same parent corporation.

RE: Wait they're not the same company??
By Imaginer on 2/13/2014 2:07:25 AM , Rating: 4
They both do share the same family values... if that is what you mean.

By AssBall on 2/13/2014 2:58:43 AM , Rating: 2
well, there was AOL and Warner broadcasting, and they got sucked in to the mess, because, well, they could not compete. Comcast has obliterated its competition... and now.. this really puts a clog into the broadcasting sector.

Personally I cannot stand Comcast and despise their business, but I wonder if it could be time to ninja grab a bit of their stock. Or drop it like its hot. 50/50?

RE: Wait they're not the same company??
By tng on 2/13/2014 10:15:13 AM , Rating: 2
May as well be the same company.

I had Comcrap in CA at my house and ditched it for Direct TV and it is a much better experience.

Back in upstate NY I have an apartment that has Time Warner and it so reminds me of Comcast, crappy service, crappy equipment, no rhyme or reason to the channel order, etc...

Oh heck no
By coburn_c on 2/13/2014 6:37:40 AM , Rating: 2
I'm not sure whether they should just prevent the deal or let them merge and then break them up into dozens of companies.

RE: Oh heck no
By imaheadcase on 2/13/2014 9:09:24 AM , Rating: 2
What no one is reporting is they were in talks with Charter to divide up the territory. Charter was going to pay Comcast for the areas.

RE: Oh heck no
By lamerz4391 on 2/14/2014 10:07:10 AM , Rating: 2
Don't forget the illegals. And the NSA. And the massive corporations that own Washington.

RE: Oh heck no
By superstition on 2/14/2014 11:08:16 AM , Rating: 2
And the massive corporations that own Washington.

That are Washington.

By DocScience on 2/13/2014 2:58:35 PM , Rating: 3
Now we will see if buying the Platinum Level membership in the Obama Fan Club is worth it.

RE: antitrust?
By Arsynic on 2/13/2014 3:07:59 PM , Rating: 3
Obviously the homosexuals are the only one that can get platinum membership. Seems like the only people benefiting from Obama are gays.

I'm All For It...
By Arsynic on 2/13/2014 10:47:27 AM , Rating: 2
Only if it gives the new entity more leverage against the content providers to push against more rate increases and for an a la carte service.

I'm not for it if the "new boss" is same as the "old boss" except that consumers don't have anywhere else to go if they don't like getting the Comshaft.

I smell throttling
By superstition on 2/13/2014 1:42:15 PM , Rating: 2
We'll see how net neutrality fares.

I wonder how much Netflix will have to pay off Comcast to keep its streaming rate up?

And, if you think the throttle then cancel policy was bad in terms of P2P filesharing and such... expect the Spanish Inquisition.

Oh joy...
By TakinYourPoints on 2/13/2014 7:37:25 PM , Rating: 2
Increased prices for inferior service, I can't wait!

who's the competition?
By robywire on 2/14/2014 8:22:28 PM , Rating: 2
Mick hyperbole!
The only time the word "compete" is used, is Mick's lame heading. He then writes an article that never mentions the word "compete" and has to make up a fact so that he can use the word "competition" ONCE. But it is easy to understand why, these two companies DO NOT COMPETE with each other for customers. They are government sanctioned monopolies that operate in entirely different markets. Comcast gets this neighborhood and TW gets that neighborhood. The concept of Comcast-vs-Time Warner is a fantasy that everyone has wished for for so long that they actually believe it is true.

As a business decision, this merger cannot be argued against because they do compete against each other to purchase content. And content is the name of the entertainment game.

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