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Bazinet
Citigroup media analyst Jason Bazinet is among the first Wall Street investment analysts to call for the mother of all cable mergers – Comcast snapping up control of Time Warner Cable, respectively the nation’s largest and second largest cable operators. Comcast reported having nearly 23.9 million customers at the end of June; Time Warner Cable said it had about 13 million customers.
In a research note issued today, Bazinet argued that a merger would result in major cost savings for both operators, including $1.6 billion dollars in savings possible from volume discounts for cable network programming to $1.1 billion in savings from employee layoffs, reduced marketing expenses, technical and customer service support, billing, and combining equipment purchases, among other things. The total net present value of the synergies would come to around $11 billion to $12 billion. That’s not far from Time Warner Cable’s current market value of about $14 billion, according to The New York Times.
A super-sized Comcast would also be able to leverage lower prices when competitively necessary to keep a price advantage over satellite television and telephone company TV, according to Bazinet.
Both Time Warner Cable and Comcast have not publicly indicated any interest in combining forces. Aside from the regulatory headaches probable from a more skeptical Obama Administration that might aggressively counter such a merger, Comcast Chief Operating Officer Stephen Burke questioned whether the cost savings were anywhere near as high as Bazinet speculated.
Multichannel News quoted Burke:
“We would like to get bigger if the economics were right,” Burke said. “Its pretty hard for me to see how there would be synergies on the programming side or on the hardware side when you go from 24 million subscribers to 27 [million] or 30 [million].”
Time Warner CEO Glenn Britt refused comment.
Still, Wall Street investors were interested. Time Warner Cable stock shot up 3.5% this afternoon, while Comcast’s rose just a few cents during afternoon trading.
Other stories of interest:
- Wall Street Smells Money – JP Morgan Bullish On Cable: Time Warner Cable & Comcast Ready To Earn More From Broadband
- Cable “Digital Phone” Service Hits Speed Bump: No More Easy Money, Says Wall Street Analyst
- When Competition Isn’t: Comcast<->Clearwire<->Time Warner Cable
- Comcast $hopping $pree: What To Buy First? — The Coming Cable Consolidation
- Time Warner Cable Will Introduce WiMax Wireless Broadband Service This Fall
And I’m sure those cost savings would be passed on to the consumer as lower cable bills. I mean they are the cable company and they wouldn’t screw their customers would they….
I really don’t see a problem with such a merger, as long as the cable companies are forced to offer every channel they have to sat or telcoTV at a reasonable price (under $5 per channel, a la carte). With that provision, I think the Comcast + TWC merger would be advantageous. It would mean that 50/10 internet would soon be available in all formerly TWC territories, and Comcast’s backbone plus TWC’s would mean that most traffic stays on-network, increasing quality of service. There’s no Cocmast-TWC competition in any area, so there’s no real reduction in competition, and maybe with that much size Cocmast can stand up to content provider rate increases.
That said, the cable carriage provision is crucial, particularly for folks who can’t get cable.
“There’s no Cocmast-TWC competition in any area, so there’s no real reduction in competition,”
And I think you’ve pointed out a major problem with how this market operates today. These aren’t competitors merging. You can’t add up all the cable companies in this country and say “Look! There’s plenty of competition to choose from!”
I think you’re right in that a merger wouldn’t change the competitive landscape, but it would serve to highlight just how uncompetitive it really is.
The issue is that if you look at a relatively local provider with a strong base like Cablevision and see the types of products that they have to offer in the NY metropolitan area to compete and even compare it to companies like TWC and Comcast (which also service parts of the Tristate Area) which create national policies for their products (such as bandwidth caps, cable/internet service levels, tv buying/pricing power, etc), since losing customers in certain areas would not make that much of a difference, and they would not necessarily have to eat the local upgrade costs.
For example just compare the speed levels TWC offers in Manhattan and Queens to what Cablevision can offer in the Bronx and Brooklyn.
It would decrease the necessity for localized competition, in other words the large national MSOs would be able spread competitive risks on a national level and will be able to afford to spread poorer quality service on that national basis.
You would think that areas near major hubs such as Manhattan, Queens, Fort Lee, Englewood cliffs along with the Bay Area (which is just Comcast and Comcast does enforce their 250gb cap) would generally have a lot more bandwidth than other parts of the country, yet TWC and Comcast still generally limit their speeds and bandwidth cap policies with an elastic national band and not on a localized basis.
How? TWC is owned by Time Warner…is Comcast going to buy Warner Studios, HBO, and all the rest or just Time Warner is going to magically give up a cash cow like TWC?
The last I checked Time Warner Cable is now a separate entity to Time Warner Corporation from before where TWC was owned by TW Corp.
“The last I checked Time Warner Cable is now a separate entity to Time Warner Corporation ”
Looks good on paper Don’t it.
I guess so… lots of tax write offs.