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Comcast deal would reshape pay TV in U.S.

Staff and Wire Report
February 13. 2014 9:49PM

Comcast Corp’s proposed $45.2 billion takeover of Time Warner Cable Inc would combine the country’s top two cable providers into a colossus that could reshape the U.S. pay TV and broadband industry if it clears regulatory hurdles.

The cable provider resulting from the merger will boast a footprint spanning from New York to Los Angeles with a near-dominant position in broadband Internet which may raise the hackles of anti-trust regulators.

The deal, which would put Comcast in 19 of the nation’s 20 largest TV markets, could give it unprecedented leverage in talks with content providers and advertisers.According to the company, Comcast has about 300,000 customers in New Hampshire across 105 Granite State communities from Peterborough to Portsmouth up to Concord as well as the Upper Valley region, which includes Hanover and Lebanon.

Time Warner has more than 350,000 customers in Maine and New Hampshire. The company did not provide specific numbers for New Hampshire.

Manchester-based WMUR-TV has yet to reach a contract with Time Warner to carry its secondary digital channel, MeTV New Hampshire, which offers classic television and a 10 p.m. newscast.

A merger could mean that Time Warner customers, who live in areas around Keene and the North Country, could have access to the secondary channel, said Alex Jasiukowicz, spokesman for WMUR-TV.

However, the merger of two cable operators will face a fierce battle in Washington, Janney analyst Tony Wible said in a research note.

He noted that while Comcast and Time Warner Cable don’t directly compete in any markets and could help consumers by keeping programming costs in check, “the government could still object and may be more concerned about one company controlling so much of the country’s broadband infrastructure.”

In New Hampshire, the state’s consumer protection chief said he would keep an eye on it, but any intervention would likely be done in concert with other state attorneys general.

“It (cable) is an issue that people care about. It affects them. People get very emotional about this,” said Jim Boffetti, who heads the consumer and anti-trust division of the New Hampshire Attorney General’s Office.

The friendly takeover announced on Thursday comes as a surprise after months of public pursuit of Time Warner Cable by smaller rival Charter Communications Inc.Comcast will pay $158.82 per share, which is roughly what Time Warner Cable demanded from Charter.

Comcast, which argued that the deal would be beneficial to consumers in that it would roll out its more advanced cloud-based set-top boxes to Time Warner Cable customers, said it would also eventually result in higher broadband speeds.

“We have a lot of experience integrating cable assets and are confident upon closing of the transaction, we can put these companies together quickly and efficiently,” Comcast Chief Executive Brian Roberts said in a call with analysts.

The companies expect to create $1.5 billion in operating savings, with 50 percent of those savings expected in the first year.

Comcast is interested in advertising synergies it would gain by owning the New York City market as well as the opportunity to expand its business services unit, its fastest-growing cable division, to a larger footprint.

“For Comcast, adding New York and Los Angeles has advertising potential, along with Time Warner Cable’s sports assets, which provides an acquisition target that is simply too compelling to ignore, especially with an (under-leveraged) balance sheet,” said BTIG analyst Rich Greenfield.

Roberts said the company would divest 3 million subscribers, but said the company had made no decisions on which markets to sell. Together with Comcast’s 22 million video subscribers, the roughly 30 million total would represent just under 30 percent of the U.S. pay television video market.

The new cable giant would tower over satellite competitor, DirecTV, which has about 20 million video customers.

If successful, the deal will be the second time in little more than a year that Comcast has helped reshape the U.S. media landscape after its $17 billion acquisition of NBC Universal was completed in 2013.

The proposed combination, which would give roughly 23 percent of the merged company to Time Warner Cable shareholders, is subject to approval from the U.S. Department of Justice and the Federal Communications Commission. The two companies expect to close the deal, which unusually for a major deal has no break-up fee, by the end of the year.

Information from Reuters was used in this report.

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