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Comcast Brings Gigabit DOCSIS 3.1 to Philadelphia, South Jersey

Comcast customers in Bucks, Chester, Delaware, Montgomery, and Philadelphia counties in Pennsylvania as well as parts of New Jersey and New Castle County, Del. can now subscribe to the company’s DOCSIS 3.1-powered gigabit broadband service.

Jim Samaha, senior vice president of Comcast’s “Freedom Region” surrounding southeastern Pennsylvania says at least two million customers will be able to subscribe to the new, faster broadband speed immediately.

“We have been on a pace of doubling our network capacity every 18 to 24 months, ensuring that we stay well ahead of demand,” said Samaha in a statement.

Comcast is running an introductory promotion that will price the gigabit service at $79.99 a month with a one-year contract or $104.95 a month for month-to-month service. A 1TB usage cap did apply to customers on a gigabit plan who did not agree to a term contract, but there was some debate on that point with Comcast representatives giving conflicting answers. Customers who want a cap-free experience with Comcast may have to pay an additional $50 a month.

Who Will Buy Charter? Altice, Comcast, SoftBank, or None of the Above?

The French press did not take kindly to comments from MoffettNathanson analyst Craig Moffett, who suggested Altice’s ability to swallow up Charter Communications in a deal worth at least $185 billion dollars was “not credible.”

Panelists appearing on French language business news channel BFM TV chuckled at Mr. Moffett’s ability to predict Altice chairman Patrick Drahi’s next move.

“Mr. Moffett does not know Mr. Drahi like we’ve come to know Mr. Drahi,” noted one analyst. “We’ve learned not to underestimate his ability to put together business deals that some would call bold, others financially reckless, yet he does it again and again. If Mr. Drahi wants [Charter], he shall have it.”

French business reporters have scoffed at Altice for years, well before the company arrived in the United States to acquire Cablevision and Suddenlink and rebrand them as Altice.

“When you don’t take him seriously, that is when he strikes,” reported BFM.

Drahi is a master of using other people’s money to finance massive telecommunications deals. For him, bigger is essential, and that means he’d either have to acquire Comcast or Charter or hope to build a cable empire out of smaller cable companies he’d acquire and combine.

Drahi (center)

Multiple independent media outlets are tracking Drahi’s movements. Le Figaro reports Drahi has spent months laying the groundwork for his next big takeover in the United States and the newspaper knew all along it would be a major deal, because Drahi is banking on the prospects of emptying the pockets of millions of American cable subscribers to fund his operations. Americans pay vastly more for cable television and broadband service than consumers in Europe because of a lack of regulation and competition.

The newspaper adds that Drahi routinely tells investors and reporters he wants to be “number one or two” in all countries where he does business. Right now Altice is the fourth largest cable operator in the United States, an absolutely intolerable situation for Mr. Drahi.

Drahi is well aware of the enormous cost of a Charter acquisition, and Bloomberg News reports he is considering asking the Canada Pension Plan Investment Board and BC Partners to help fund the potential merger. Both groups are already familiar with Mr. Drahi and Altice and were instrumental in his acquisition of Cablevision and Suddenlink. Despite the potential help, Moffett still believes Charter is well outside of Altice’s reach.

“None of the proposed suitors—Verizon, SoftBank, Altice—have the balance sheet to acquire Charter,” Moffett wrote his investor clients in a research note. He notes Greg Maffei, chairman of Liberty Broadband, is unconvinced of the wisdom of allowing a buyer to use its other highly leveraged companies as compensation in a merger deal.

Moffett believes the deal has to make sense to two people to proceed – John Malone, Charter’s largest shareholder and ironically Drahi’s mentor and Charter CEO Thomas Rutledge, who was America’s highest paid executive in 2016. He stands to get considerably richer if he can fend off a deal until he achieves tens of millions in stock option awards, first when Charter’s average share price tops $455.66 a share and stays there for at least 60 days and then again when the share price exceeds $564 a share and stays there for 60 days. This morning, Charter Communications was selling at just over $399 a share. All of the merger and acquisition talk is helping boost Charter’s stock price, but Rutledge doesn’t want the company sold until after he can walk out with his compensation package fully funded or finds a buyer willing to make him whole.

As for Malone, he’s always been willing to cash out, but only when the deal makes financial sense to him and avoids taxes.

“Let’s put a finer point on it,” Moffett added. “The ONLY reason [Liberty Media chief] John Malone would be willing to swap his equity in Charter for equity in Altice would be if he believed, with real conviction, that Altice could simply manage the asset better than Charter’s current management.  It is not a knock on Altice to suggest that there is simply no way that Liberty would believe that. Next.”

But then, Time Warner Cable’s management didn’t take an acquisition offer from Charter Communications seriously either when it was first proposed. Time Warner Cable believed selling to Comcast made better sense to shareholders and executives. Like Altice, Charter was a much smaller cable operator proposing to buy a much larger one. In the end, regulators rejected the deal with Comcast and with Wall Street beating the drum for someone to acquire Time Warner Cable, Charter’s sweetened second offer was readily accepted.

Charter’s biggest downside to a potential acquirer is the $60 billion in debt it took on buying Time Warner Cable and Bright House Networks. Debt at SoftBank also makes Moffett skeptical of a deal between Sprint and Charter.

“They [SoftBank] already sit on $135 billion of debt,” Moffett wrote. “Add Charter’s $63 billion and you’re within a rounding error of $200 billion. Add any cash at all for Charter’s equity and you’re flirting with a quarter trillion (trillion!) dollars of debt. Were SoftBank to buy Charter, they would become not only the most heavily indebted non-financial company the world has ever seen, they would in fact be more indebted than most countries.”

To avoid crushing debt scuttling a deal, Citigroup speculated in a report to their investors that Comcast and Altice could partner up to divvy up Charter Communications themselves. The Wall Street bank speculates Comcast would help finance a deal if it meant it would take control of Charter’s customers formerly served by Time Warner Cable. Legacy Charter customers and those formerly served by Bright House would become part of the Altice family.

Such a transaction would likely overcome Malone’s objections over an Altice-only offer leaving him with a large pile of Altice USA stock.

Just as with Time Warner Cable, once a company is seen willing to deal, fervor on Wall Street to make a deal — any deal — can drive companies into transactions they might not otherwise have considered earlier. If Charter is seen as a seller, there will be growing pressure to find a buyer, if only to satiate investors and executives hoping for a windfall and Wall Street banks seeking tens of millions in deal advisory fees.

Revolving Door: Head of N.J. Consumer Agency Resigns to Take Comcast Job

Lee

Steve Lee, the director of the New Jersey Division of Consumer Affairs is resigning to take a job with the nation’s largest cable company.

Lee, whose resignation becomes effective Sept. 5, will become Comcast’s deputy general counsel, according to a statement released Tuesday by the state Attorney General’s Office.

Lee has been in charge of the consumer protection agency since 2014, but has spent the last several months speaking with Comcast about accepting a position likely to pay substantially more than he earns in his current role.

Lee’s three years as director has not seen any significant actions against Comcast initiated by his office. During Lee’s tenure, the Division has primarily focused on an aggressive prescription monitoring program to combat opioid abuse, sexual misconduct by doctors in exam rooms, and streamlining state licensing procedures.

The deputy director of the division, Sharon Joyce, will become acting director effective Sept. 6. She has been with the Division of Law since 1979 and has served as the acting director on three prior occasions.

Comcast Trying to Get Rid of Public Service Obligations in Vermont

A requirement that Comcast must operate in the public interest of the people of Vermont may result in the cable company filing suit against the state.

Comcast is upset about the state’s “Certificate of Public Good,” which puts a responsibility on Comcast to support Vermont’s public access channels, include their programming lineups in electronic program guides, and expand service with 550 additional miles of cable line extensions over 11 years.

Comcast lobbied the Vermont Public Utility Commission to drop the requirements, but their request was turned down last week.

“We are disappointed the Vermont Public Utility Commission chose to deny our motion for important amendments necessary to fairly compete in Vermont,” Comcast spokeswoman Kristen Roberts told Vermont Public Radio. “We are still reviewing the order and have not yet determined our next steps.”

Comcast told the Commission upgrades would be costly and cumbersome, particularly because many of its systems in the state were acquired from Adelphia, a cable company that declared bankruptcy in 2002 as a result of executive corruption. Most of its cable systems, some in disrepair, were sold to Time Warner Cable and Comcast, who were forced to commit additional funding to upgrade them soon after the acquisitions were complete.

The Commission was not impressed with Comcast’s arguments, suggesting the requests in the Certificate were achievable and given a long lead time to complete.

Comcast may appeal the order in court.

Citigroup Urges Comcast to Buy Verizon; Nice Monopoly if You Can Get It

Citigroup is advocating for another super-sized merger, this time lobbying Comcast to buy Verizon Communications — a deal worth up to $215 billion.

Citigroup analyst Jason Bazinet believes the more corporate friendly Trump Administration would not block or impede a deal that would bring together the nation’s largest cable operator and wireless provider. Such a merger would leave a significant portion of the mid-Atlantic, northeast, and New England with a monopoly for telephone and broadband service.

Bazinet offers four reasons why the deal makes sense to Wall Street banks like his:

  • Verizon Wireless could give Comcast customers internet access seamlessly inside and outside of the home;
  • The cost of expanding fiber optics to power faster internet and forthcoming 5G wireless broadband would be effectively split between the two companies and there would be no need to install competing fiber networks;
  • Verizon would benefit from additional wireless consolidation because it would no longer face significant emerging wireless competition from Comcast;
  • A combined Comcast-Verizon could see their corporate tax rate slashed by a considerable percentage, reducing tax liabilities.

We’d add Wall Street banks that win the enviable position of advising one company or the other on a merger deal stand to make tens of millions of dollars on consulting fees as well.

Such a merger would be unthinkable under prior administrations, if only because a combination of Verizon and Comcast would eliminate the only significant telecommunications competitor for tens of millions of Americans, giving the combined company a monopoly on telecommunications services.

Some Wall Street analysts believe a deal is still possible with Republicans in charge in Washington. But some spinoffs are likely. One scenario would involve selling off Verizon’s wireline assets in areas where Comcast and Verizon compete. But increasing questions about the financial viability of a likely buyer like Frontier Communications may make a deal bundling old copper wire assets and FiOS Fiber in New Jersey, the District of Columbia, Maryland, Delaware, Massachusetts, and Virginia a difficult sell for other buyers.

“If Brian came knocking on the door, I’d have a discussion with him about it,” Verizon CEO Lowell McAdam reportedly said this spring, according to Bloomberg News, referring to Comcast CEO Brian Roberts.

McAdam shouldn’t wait in his office, however. This morning, as part of a quarterly results conference call, Roberts made clear he wasn’t particularly interested in a merger with a wireless provider.

“I thought we were really clear last quarter,” Roberts said. “Yes, we always look at the world around us and do our jobs related to the opportunities that are out that. But we love our business. No disrespect to wireless, but that’s a tough business.”

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  • Willie: Yep. I was just thinking. Thanks Google, for screwing over Buffalo, Syracuse and Rochester. The other streaming services seemed to be ignoring upstate...
  • FredH: So - what's the matter with New York state?...
  • xnappo: Man. Really starting to wish we hadn't complained about Comcast buying TWC. Charter/Spectrum are so so so much worse....
  • L. Nova: That's the point. Verizon & AT&T want OUT of the landline business by 2020. That's why they are waiting for Frontier to recover from the mass...
  • BobInIllinois: This incident goes to show that even Manhattan hipsters cannot get Verizon to care about fixing POTS/DSL/Copper problems....
  • L Nova: Frontier's stock has remained stable the last few weeks since their 15-to-1 reverse stock split. I see another wireline buyout from Verizon coming in ...
  • Shaun: I think it is more like, "Are they going to expand Fios?" Here, they just plainly flat out refused to do it, so, velocity said, if they won't, we will...
  • Phillip Dampier: From the looks of it, they vastly oversell their broadband service and lack adequate capacity to support their advertised speeds. So you buy 150Mbps w...
  • Phillip Dampier: Can you imagine an outage like this lasting nearly three weeks in the 70s or 80s. Yes you can... if you lived in Ghana....
  • Mohammed: Extend fios now, do not sell off assets to frontier focus is on fios expansion, not buying failed media companies. Time to build fios now, not cut job...
  • Josh: I can't get Mediacom (though they advertise in my area). I have no idea how they are, but I do like at least that they're a smaller company, and that...
  • Shaun: I live in Pennsylvania, so that does me no good. And I own my own equipment, so need to return anything since I don't have anything of theirs for the ...

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