Consumer advocates are horrified by the thought that Comcast, possibly in conjunction with Charter Communications, might become even bigger than it already is by engineering a deal to buy Time Warner Cable. But two Wall Street analysts say this morning that this would make sense financially — and probably would pass muster with federal regulators. TWC shares closed on Friday at $132.92, and investors might see an offer of $160 if Comcast and Charter decide to team up to buy TWC and divide the spoils, Wells Fargo Securities’ Marci Ryvicker says. She envisions Comcast taking 67 TWC markets with 7.4M subscribers, mostly in the east (including Manhattan), while Charter could end up with 20 markets that have 4.5M subs (including Los Angeles). Even though Comcast is the No. 1 cable operator and also owns NBCUniversal, Ryvicker says the feds might allow it to grow. There’s no formal cap on cable subscriptions — in 2009 the U.S. Court of Appeals threw out the 30% limit. And since Comcast and TWC don’t compete with each other in any markets “it would be tough to see an outright objection [on antitrust grounds] from either the FTC or DOJ.” The FCC is a different story, since it can weigh broader questions about the public interest. Yet Comcast could argue that — because it owns NBCU — it wouldn’t abuse the clout it would have to demand lower programming prices. Comcast might have to accept a lot of conditions and restrictions. Still, Ryvicker doesn’t see it “walking away from an opportunity that could reap significant long term benefits.”
Morgan Stanley’s Benjamin Swinburne reaches a similar conclusion. He imagines Comcast and Charter offering $150 a share. A joint bid “could potentially create the most value by maximizing synergies, but is also the most complicated to execute,” he says. Regulators would probably insist that Comcast and Charter agree to keep their systems open to independent programmers and potentially competitive video streaming services with “a focus on broadband pricing.”
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