A Federal Communications Commission official has warned that should cableco Comcast attempt to take over rival Time Warner Cable (TWC) outright, it would face significant regulatory difficulties in Washington. Commissioner Ajit Pai told the Wall Street…
A Federal Communications Commission official has warned that should cableco Comcast attempt to take over rival Time Warner Cable (TWC) outright, it would face significant regulatory difficulties in Washington.
Commissioner Ajit Pai told the Wall Street Journal that the Obama administration had put M&A under greater scrutiny and recent precedents suggested a Comcast/TWC merger would be difficult.
Pai cited AT&T’s failed attempt to take over T-Mobile USA, which the Department of Justice (DOJ) blocked in 2011. He also pointed to the significant remedies American Airlines agreed to last month to get its US Airways merger over the line.
Pai, one of the two Republicans on the five-person commission, said that if the GOP took back the presidency his party would be more likely to allow a deal.
A Washington lawyer previously told TelecomFinance that the FCC may face difficulty in finding a way to block a Comcast/TWC deal.
“The FCC had tried to establish some rules that would prohibit any MPVD (multichannel video programming distributor) 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,” said Dana Frix, managing partner at Chadbourne.
“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 Comcast takeover].”
Frix said that Comcast would however have to offer significant remedies.
TWC’s main suitor appears to be Charter Communications, but TWC’s board is not keen on being taken over by Charter due to the amount of debt the merged entity would carry, according to multiple reports.
It has been reported that TWC has approached Comcast about a merger in recent months. A joint Charter-Comcast bid has also been suggested while Cox Communications is rumoured to be interested too.
Comcast is the largest cable operator in the US with roughly 22 million subscribers while TWC is second with circa 12 million. After that come Cox and Charter, which both have less than 5 million customers.
Meanwhile TWC’s board is reported to have a number in mind for the price it would sell at. The cableco would probably accept a bid of US$150 to US$160 per share, a person familiar with the matter told Bloomberg.
That would equate to a premium of between 13% and 20% on TWC’s closing share price yesterday, and value the company as high as US$45bn. Its share price has already risen by more than 40% over the past year, in part fuelled by M&A speculation.
