December 26, 2014
Comcast made a public announcement on 13th February 2014 regarding its proposal to merge with Time Warner cable. This merger was to take the form a stock swap. Stock swap is a strategy in which the firm acquiring offers stock as cash to the acquired firm. For this to happen, each company should be valued so that the correct swap ratio can be calculated.
Learn more about valuation and how to do it in our financial modelling course.
Comcast began the regulatory review process for the time warner merger, which at the time of announcement was valued at $45.2 billion, by filing a public interest statement at the Federal Communications Commission which, as a part of its broad objectives, overlooks competition in the communications sector.
FCC restarted the review process on the Comcast – Time Warner merger on December 4th, which was initially paused due to a wide range of issues.
Comcast and Time Warner are the two largest cable operators in the US. If merged, these firms together would control an estimated 35% of the broadband internet service coverage and approximately a third of the pay television subscribers.
Given this reach, competitors and public interest groups are afraid that this merger would not only sabotage competitive play but also increase the prices of the services while limiting the programming choices.
A group anti-trust experts from Harvard to Stanford and everything that’s between have written to FCC asking it block the Time Warner merger with Comcast. Their biggest worry being that given the almost non-existent competition in broadband, not only the situation worsens, but entry of new players becomes impossible.
A group of companies, public interest groups and labour unions have formed a coalition that is opposing the approval of the Time Warner merger by FCC.
Members of the coalition are accusing Comcast of using lobbyists and hefty sums to influence FCC which is expected to give a “go” to the deal by the end of the review period. However, the coalition is positive that by using facts and presenting strong arguments in opposition can help them to prevent the Time Warner merger.