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GOP Tax Cut Law Will Deliver $14.4 Billion to Comcast for Mergers, Share Buybacks by 2021

Phillip Dampier January 18, 2018 Comcast/Xfinity, Consumer News, Public Policy & Gov't 1 Comment

The Republican-pushed corporate tax rollback will bring a $14.4 billion increase in available cash flow for Comcast to use for future mergers and acquisitions or share buybacks by 2021, even as the cable company has no plans to share its tax savings bonanza with subscribers in the form of lower rates.

MoffettNathanson analyst Craig Moffett noted Comcast will likely only spend the largess on two things — acquiring other companies to further concentrate the media marketplace or, more likely use its newly available cash flow on a blockbuster share buyback program, which will boost Comcast’s stock price and deliver dramatically higher bonuses to the company’s top executives.

Moffett believes Comcast is following in the footsteps of Time Warner Cable a decade ago, shortly after the company was split away from Time Warner, Inc. The former Time Warner Cable fueled interest in its stock by committing to keep its leverage at a stable 3.25 x EBITDA, which means it would not be spend a lot of money or take on a lot of debt to upgrade its cable systems, make expensive acquisitions, or cut rates for subscribers. As a result, Comcast’s free cash will quickly accumulate, which it will either use to buy other companies, return to investors in the form of a dividend payout, or buy back large numbers of shares of its own stock, making shares already owned by investors more valuable. Since most executive compensation packages tie bonuses to the share price of the company’s stock, and often include stock share awards for executives, top officials can take home tens of millions of dollars in bonuses.

The Trump Administration claimed the dramatic cut in the corporate tax rate from 35% to 21% would create new investment, result in new job creation and higher pay. But at Comcast, its existing investment plans developed before the tax cut law was passed remain largely unchanged, the company laid off nearly 1,000 workers in the last month, and so far has only committed to giving qualified employees a one-time $1,000 bonus, which will cost the company a one time charge of less than $150 million — about 1.04% of Comcast’s tax cut cash haul.

Goodbye FairPoint, New Owner Rebrands as Consolidated Communications

Just shy of 10 years after FairPoint Communications acquired Verizon’s landline properties in the northern New England states of Maine, New Hampshire, and Vermont, both the company and its name are disappearing forever.

Consolidated Communications, which announced it would acquire FairPoint in December 2016, intends to put FairPoint’s name and reputation behind it, and is rebranding the phone company as Consolidated Communications with plans for significant broadband upgrades for its customers.

FairPoint bought the assets of Verizon’s landline network in the three northern New England states in 2007 for $2.4 billion. The transition from Verizon to FairPoint did not go well, and the company stumbled for years trying to keep up with billing and service problems and the need to continually expand broadband service to stay competitive, all while also trying to pay off the debts it incurred in the acquisition. The company failed on all accounts and declared bankruptcy in 2009, eventually emerging with a new business plan in 2011.

FairPoint’s performance post-bankruptcy has relied on cautious spending, cost-cutting measures and benefits cutbacks for its employees, which triggered a 131-day strike in 2014 among FairPoint’s union workforce — the longest walkout of any company that year. Replacement workers sent in to handle service calls and network maintenance were criticized by customers and lacked experience to manage New England’s rough winters.

By early 2016, executives claimed their “turnaround” plan for FairPoint had made significant strides. By that summer, activist shareholders were demanding FairPoint be put up for sale, in part to allow them to quickly recoup their investments in company debt that could not be monetized unless another company acquired FairPoint and assumed those debts.

In late 2016, Consolidated Communications did exactly that, acquiring FairPoint’s assets in northern New England and many other states where it operates small phone companies for $1.5 billion — a significant drop in value for assets that sold for nearly $1 billion more nine years earlier.

Rob Koester, Consolidated Communications vice president for consumer products clearly wants to put FairPoint behind him.

“It is a new beginning,” he said. “It’s a new chapter for us. It’s a re-dedication to our customers.”

Some of the biggest planned changes appear to be more job cuts. Consolidated recently eliminated FairPoint’s state president positions in Maine, New Hampshire, and Vermont and will depend on regional management instead. The phone company will also once again face negotiations with unions that represent much of its workforce later this year. Most expect the unions will not be friendly to anticipated company efforts to further consolidate and reduce benefits.

Promised broadband upgrades from speed increases come with few details, except a broad commitment to raise speeds for 300,000 internet customers over the course of this year — which represents about 30% of FairPoint customers. Spokeswoman Angelynne Amores claims there will be no price hikes for faster internet speeds.

But Consolidated will also be under the watchful eye of Wall Street, which does not want the company to invest too much in broadband upgrades until shareholders are comfortable with the company’s financial future. There are few business successes in wireline acquisitions and mergers these days, as Frontier Communications can attest from its purchase of Verizon’s network in Florida, California, and Texas.

Any upgrades cannot come soon enough for FairPoint customers forced to endure its DSL service as their only internet access option.

Michael Charter, a FairPoint customer in Jericho, Vt., lives just outside the state’s largest city, Burlington, where there are several internet service providers. But in his part of Jericho, FairPoint is the only broadband provider available, and it does not come close to offering actual broadband speeds.

Charter told the Associated Press his current solution is to buy two DSL accounts from FairPoint and divide up the load from his family’s streaming, internet browsing, downloading and telecommuting across two different accounts. His television and computers share one FairPoint DSL account hooked up to one router while other internet usage is confined to a second router connected to a second account. FairPoint is unable to bond the two connections together to increase speed, so two slow DSL lines is the best option for him for now.

Consolidated isn’t likely to make a lot of money taking over FairPoint’s residential and business landlines or DSL accounts. But it could earn substantial revenue from FairPoint’s extensive fiber network laid across the three northern New England states it serves. Companies and public institutions rely on fiber connectivity, as do cell towers — including the future swarm of 5G small cells expected to eventually be placed across the phone company’s footprint.

The phone company’s biggest rival is Comcast, which has some cable coverage in the region, but large sections of all three states are bypassed by Comcast and Charter Communications, which has a substantial presence in eastern Maine.

Comcast Adds 4G Backup to Cover Internet Outages for Businesses

Phillip Dampier January 11, 2018 Comcast/Xfinity, Consumer News, Wireless Broadband 2 Comments

Comcast’s Business division has introduced the first automatic 4G backup internet connection service for commercial customers who experience an internet outage or network problem.

Comcast’s Connection Pro ($29.95/mo) offers automatic switching to a backup 4G LTE wireless internet service that will keep business customers connected to the internet until Comcast’s wired broadband connection is repaired and goes back online.

“Internet connectivity is critical for any business. Losing their connection – even shortly – can be disruptive,” said Jeff Lewis, vice president, data product management, Comcast Business. “Comcast Business understands that businesses need a redundant back-up solution to help stay connected and provide greater peace of mind in the event of a power or internet outage.”

The service targets small businesses and retailers and is marketed as a backup for cash registers/credit card point of sale terminals, email, and cloud services, and includes battery backup to maintain connectivity for up to eight hours in the event of a power outage.

Business customers can also access an online control panel to remotely monitor outages at individual business locations.

Comcast Laid Off Hundreds Before Christmas and Kept it Quiet With Non-Disclosure Agreements

Phillip Dampier January 4, 2018 Comcast/Xfinity, Public Policy & Gov't 3 Comments

Two weeks before Christmas and on the cusp of passage of the Republican-sponsored corporate tax cuts that promised better pay and more jobs for workers, Comcast fired at least 500 door-to-door sales employees and required them to sign non-disclosure agreements in return for a severance package.

Managers, supervisors, and direct sales staff in Chicago, Florida, and across Comcast’s Central division — including the midwest and southeastern U.S., were abruptly terminated around Dec. 15, according to documents obtained by the Philadelphia Inquirer.

Most of the workers trudged door to door in neighborhoods and apartment complexes selling Comcast services to residential customers. Comcast has attempted to keep the layoffs quiet by requiring laid off workers to sign a non-disclosure agreement if they want a severance package. After being confronted by the newspaper, a Comcast spokesperson confirmed the layoffs.

“The Central Division is creating a new territory-based sales model that will connect more closely with residential prospects and customers in their communities,” Comcast spokeswoman Jennifer Moyer said Thursday. “By giving highly trained sales professionals direct responsibility for entire neighborhoods, we can provide a better experience for those who are interested in our services, during and after the sale.”

Because the layoffs only affect some of Comcast’s regional divisions, additional job cuts could be forthcoming if the company adopts its new sales model nationwide.

The Philadelphia Inquirer could not identify affected employees because Comcast required laid-off workers to sign Non Disclosure Agreements (NDAs).

Embittered employees are upset having to remain anonymous talking about their jobs disappearing just before Christmas. Comcast also gets to avoid paying the fired workers its heavily promoted $1,000 bonus because Comcast conveniently eliminated their positions shortly before announcing the bonus.

The Trump Administration promoted the corporate tax cut as a Christmas gift to the middle class, claiming it would inspire companies to add jobs and boost worker pay. At Comcast, the tax cut will provide hundreds of millions in tax savings annually that are expected to be mostly returned to shareholders. Corporate executives are also expected to benefit through significantly higher bonuses tied to the increased cash on hand from tax savings and the higher value of Comcast’s stock. Comcast has made no commitments about hiring new workers, but did claim it would invest up to $50 billion in its company’s operations, which is roughly comparable to what Comcast traditionally spent before the tax cuts were announced.

According to the newspaper, it seems Comcast treated its shocked workers with about as much sensitivity as it gives its customers:

Rumors of an employee cutback among the sales people at Comcast had been percolating for weeks. But the disclosure of the terminations came as a shock when the employees were called into a company meeting in the southeastern U.S. in mid-December.

They were told that a new Comcast direct sales system requires fewer bodies “and as of today everyone in this room does not have a job anymore,” the terminated Comcast employee said.

One employee kept holding his head and saying “I can’t believe it. I can’t believe it.” Another worried about how to find new health-care coverage. A third employee was close to purchasing a new home and feared the personal income hit.

Comcast direct sales employees earned $50,000 to $100,000 through a low base salary and commissions, the terminated employee said. The commissions ranged between roughly $75 for a new Internet Plus customer to $350 for a new customer who ordered a triple-play package with home security, the former employee said.

“I don’t know how you do this right before Christmas.”

Fierce Cable Predicts 2018 Will Be A Year of Big Cable Mergers

While giant cable company mergers unexpectedly took a breather in 2017, Fierce Cable predicts this year isn’t likely to be a repeat of last year.

“With polls showing Democrats poised to begin sweeping back into power with the 2018 midterm elections, look for cable operators to make hay on the current regulatory climate and start turning their rivals into that most precious of resources: scale,” writes Daniel Frankel.

With time for large cable operators to get easy approval of merger deals from deregulation-minded Republicans potentially running out, 2018 could bring dramatic consolidation in the cable industry, with Comcast a likely buyer and Charter Communications a potential seller… if the offer is good enough.

Many industry observers expected the first year of the Trump Administration to be a banner year for cable mergers, especially with the entry of Altice, a European cable conglomerate known for its willingness to overpay to acquire cable operators. Altice has since run into significant financial challenges and investor blowback, forcing the company to shelve acquisition plans for now and focus on debt reduction and developing a stronger business plan to operate its ailing cable and wireless properties in Europe. Altice USA, which owns Suddenlink and Cablevision, has not shelved its plans to upgrade many of its customers to fiber to the home service, but is also no longer seen as an immediate bidder for Charter, Cable One, or WideOpenWest.

Fierce Cable expects Comcast to respond to AT&T’s merger with Time Warner, Inc., assuming the deal successfully overcomes Department of Justice objections in court, and 21st Century Fox’s asset sales to Disney. Both transactions threaten to consolidate programming production and distribution around an even smaller group of media giants, which could challenge Comcast’s NBCUniversal unit as well as the cost of cable programming networks. Comcast has shied away from acquisitions after an embarrassing failure of its attempt to buy Time Warner Cable a few years ago.

If Comcast wants to build scale, it would naturally target an acquisition of Charter Communications, the second largest cable company in the country. The deal would give Comcast dominance over the New York and Los Angeles media markets and broadband service provision across most major American cities. Comcast could also seek a less controversial acquisition of Cox Communications, one of the few major independent cable companies left. But Comcast could also seek acquisitions in Hollywood to bolster its production capabilities.

Most other cable acquisition options would be considered scraps by the largest operators. Altice could be persuaded to prematurely exit the American market and sell Cablevision and Suddenlink if convinced it has no chance of building adequate scale to stand with Comcast and Charter. Beyond that are smaller rural and regional operators including Mediacom, Midco, WOW!, GTT, RCN, and many others that serve fewer than one million customers.

Company executives may be hoping the objections to the AT&T/Time Warner deal are an anomaly for the Trump Administration. But it’s clear that whatever smooth waters exist for upcoming mergers will get choppy as the midterm elections approach. Should Democrats win back the House and/or Senate, life will get considerably more difficult for future media consolidation deals.

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