Comcast CEO Brian Roberts told Wall Street analysts that the company’s aggressive $31 billion offer for Sky is an opportunistic effort to scale up, but winning the likely bidding war with Rupert Murdoch is not a necessity.
“Love our core businesses,” Roberts said, dropping the “I” for extra emphasis. “Anybody who’s viewing this as some diversion from that is not reading us properly. We didn’t choose to put Sky in play. That event happened around us. The question was, do we engage?”
Roberts and CFO Michael J. Cavanagh said their due diligence in recent weeks showed a chance for Comcast to grow. Their commentary on Sky came during the regular Comcast conference call to discuss quarterly results. The company had earlier reported a strong first quarter, better than analysts’ estimates, powered largely by the windfall of NBC’s Super Bowl and Winter Olympics broadcasts.
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Asked what the pursuit of Sky means in terms of strategic direction, Roberts said the proposal fits the company’s long-term pattern of “taking advantage” of market opportunities. “I go back to NBCUniversal. We didn’t have to do that,” Roberts said. “I don’t think we have to do this.” However, Sky is a “unique asset that fits with our existing strategies.” Acquiring a leading asset in a key territory, he added, “gives you optionality. … It’s how you build a business over 50 years.”
A recurring theme of the prepared remarks and responses to analysts’ questions was the fact that Sky’s blend of distribution and content mirrors the existing mix within Comcast. Expanding into Europe would enable it to keep blending those two areas on a larger scale. Some analysts have questioned whether a satellite player like Sky, with limitations inherent to its original business, is positioned well for the ongoing transition to internet video delivery. Comcast’s stock has been slumping in the weeks since it first formally signaled interest in Sky. Shares are down a fraction thus far today, but off a striking 20% in 2018 to date despite solid fundamental financials.
Cavanagh elaborated on the company’s forecast of $500 million in synergies from the deal, noting that the impact on headcount would be “limited.” He said $300 million would come from expense savings in administrative and production areas and the remaining $200 million from new revenue from exploiting Sky originals in the U.S. and NBCU via Sky in Europe. The two entities would also be able to deliver co-productions with enhanced revenue potential, he added. Those benefits, plus what Roberts described as “ongoing momentum” at Sky make this a “financially attractive transaction,” Cavanagh said.
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