The stock is +8.3% in early trading following reports that Comcast and Charter Communications are seriously considering possible bids for the No. 2 cable operator. CNBC’s David Faber reports that Comcast shareholders want it to go after Time Warner Cable. While the companies aren’t in active discussions, the owner of NBCUniversal is looking at the obstacles a deal might face at the FCC and the Justice Department. Comcast has 21.6M video subscribers while TWC has 11.6M. If they combined, Comcast would have about 35% of all multichannel video subscribers. That story follows a Wall Street Journal report this morning that Charter — galvanized by its top shareholder, Liberty Media’s John Malone — is close to landing the funds it would need to make an offer for TWC. Charter, with 4.3M video subscribers, has been talking to Bank of America, Barclays, and Deutsche Bank about potential debt arrangements. TWC has a market value of $37B, and a buyer likely would have to pay a premium over that. Most analysts believe that the time is ripe for some cable consolidation. They say that the video business is mature, and distributors need more clout to resist demands by broadcast and cable networks for higher payments. CBS’ drubbing of TWC in their 32-day contract impasse this past summer underscored the view that cable operators — facing growing competition from satellite and telco video providers — can’t afford to let popular channels go dark. But consumer advocates would flip over a deal that increases Comcast CEO Brian Roberts’ control over media content and distribution. TWC’s footprint includes Manhattan and much of Los Angeles. Like most cable operators, TWC is the leading broadband provider in its markets. The company also has 18 local news channels, 13 local sports channels, and seven local lifestyle channels.
The FCC would probably take a dim view of a Comcast-TWC deal. “A company of that size would arguably have de facto control of what content could and couldn’t exist in the U.S. (a programmer that failed to get a distribution deal with Comcast arguably wouldn’t be economically viable),” says Craig Moffett of MoffettNathanson Research. He adds that TWC could try to interest Cox Communications in a deal if it wants a so-called “white knight” to avoid falling to Charter and Malone. “What we don’t know, of course, is whether the Cox family is interested. What is clear, however, is that consolidation now really is afoot. And that Time Warner Cable is the marquee asset.”