As suitors line up to acquire US operator Time Warner Cable (TWC), a number of consolidation scenarios, including a combined bid, are reportedly being weighed up.
Its rival cablecos Charter Communications, Comcast and Cox Communications are all rumoured…
As suitors line up to acquire US operator Time Warner Cable (TWC), a number of consolidation scenarios, including a combined bid, are reportedly being weighed up.
Its rival cablecos Charter Communications, Comcast and Cox Communications are all rumoured to be contemplating offers.
Last week, it was suggested that there had been preliminary talks about a joint Charter/Comcast bid. The two cablecos would break up TWC and split its cable systems by market.
In that scenario, Wells Fargo analyst Marci Ryvicker suggested TWC’s assets would be divided by geography, with Charter taking the West Coast markets and Comcast getting its Eastern networks.
Craig Moffet, senior analyst at MoffettNathanson, told TelecomFinance that a Charter/Comcast combined bid makes sense.
“A stand alone Charter bid would leave a very heavily indebted company. A stand alone Comcast bid would face a potentially insurmountable challenge in Washington. A joint bid could solve both of those problems,” Moffett said.
The extent of the regulatory difficulties that Comcast would face in taking on TWC assets appears to be up for debate. Dana Frix, managing partner at Chadbourne, takes a different view to Moffett.
“The FCC had tried to establish some rules that would prohibit any MPVD provider from having more than 33% of the market place. Those rules were adopted twice and struck down by courts twice – they do not exist today,” he told TelecomFinance.
“I understand the impulse to say ‘Boy, this is a problem’ because it’s a big, new development. But once you get past the ‘Oh my gosh’ stage, I think the FCC’s rules are in tatters and therefore it’s hard to figure out what the precise legal basis would be for the FCC to say no [to a sole Comcast takeover].”
However he said that Comcast would be subject to remedies.
Ryvicker was also less concerned about the regulatory consequences of a Charter/Comcast bid.
“We aren’t worried about the 30% cap given that this was thrown out by the US Court of Appeals in 2009 – with some pretty strong statements. We are also not that concerned about antitrust or public interest concerns.”
Her only doubt was whether Comcast would have the appetite for another year of regulatory scrutiny, but believed it would face it if the benefits add up.
Moffett said that if Comcast wanted specific TWC assets, it could step in after a Charter takeover in case the John Malone-controlled cableco found the debt load too much.
If either Charter or Cox were to merge with TWC, significant regulatory difficulties are not anticipated.
Cox is the most recent name to be linked with a move for the cable operator. The family-owned company could take over TWC ahead of rival Charter – which is a similar size – the Wall Street Journal reported.
