About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


1 [1] (May 5, 2014)

handle is hein.crs/govccvu0001 and id is 1 raw text is: Comcast-Time Warner Cable Merger On February 12, 2014, Comcast Corp. announced a bid to acquire all of Time Warner Cable Inc. The Boards of Directors of both companies agreed to a stock-for-stock transaction whereby Comcast will acquire 100% of Time Warner Cable shares for approximately $45.2 billion in equity value. If approved, this acquisition would be the largest cable TV merger of all time. Comcast is the largest cable operator in the United States, with approximately 21.6 million subscribers receiving cable television, high speed data, and/or voice service. Time Warner Cable is the second largest cable operator with approximately 11 million subscribers in major markets such as New York City, Southern California, Texas, the Carolinas, Ohio, and Wisconsin. Table 1 shows subscriber data for the top four cable system operators in the United States. Table 2 shows subscribers for all MVPDs (multichannel video programming distributors) including cable, direct broadcast satellite (DBS), and telephone companies. As part of the acquisition, Comcast announced its willingness to divest 3 million of Time Warner Cable's 11 million subscribers. This would result in Comcast adding 8 million subscribers, bringing its total subscribership to about 30 million or just under 30% of the 100.1 million U.S. subscribers to multichannel services. Thus, Comcast would voluntarily remain under the 30% horizontal ownership cap that had previously been imposed by the Federal Communications Commission (FCC), although this cap was subsequently vacated in 2009 by the D.C. Circuit Court of Appeals (Comcast v. FCC). Comcast, on April 28, 2014, announced an agreement with Charter Communications, to complete a complex three step transaction which would, among other provisions, result in the net reduction of approximately 3.9 million subscribers of the merged Comcast-Time Warner. This proposed agreement, which is contingent on Comcast-Time Warner merger approval, will be accomplished through three separate transactions, involving an asset sale, an asset transfer, and an asset spin-off, following the merger. A combined Comcast-Time Warner Cable company would own cable and broadcast networks and stations as well as cable operating systems. In January 2011, Comcast received governmental approval for the acquisition of NBCUniversal, a major producer and aggregator of video content including the NBC broadcast network, a number of national cable networks, local major-market NBC-owned television stations, and various other media and entertainment properties. Additionally, Comcast owns a number of regional cable sports networks. Time Warner Cable also owns some local and cable channels, most notably Time Warner Cable SportsNet, which has the broadcast rights to the Los Angeles Dodgers and Lakers. Meanwhile, as part of the 2011 acquisition of NBCUniversal, Comcast agreed to a number of conditions and committed to specific undertakings in the public interest, many of which are intended to maintain a continuing competitive environment in the marketplace. Comcast has stated that several of these conditions and undertakings will be extended to the acquired Time Warner Cable systems in the event that the merger is approved. For example, Comcast has stated that the FCC's Open Internet protections will be extended to its acquired broadband networks, irrespective of whether the FCC re-establishes such protections for other industry participants. Comcast has also promised to extend broadband adoption and digital literacy programs to low-income subscribers in the acquired systems. Table I. Top Four Cable System Operators (in millions of subscribers) High Speed Basic Digital Data Voice Comcast 21.6 21.5 20.3 10.5 Time Warner 11.6 9.1 11.5 5.1 Cable Cox 4.4 3.2 4.7 2.6 Charter 4.3 3.8 4.5 2.3 Source: SNL Kagan. September 2013 third quarter data. Fe* -raM R~% E2w nrkcs The Comcast-Time Warner Cable proposed merger will be subject to a multi-faceted federal review process. The Department of Justice (DOJ) will review the merger based on compliance with the antitrust laws. The FCC will subject the license transfers that will occur in the proposed merger to review using a more broadly defined public interest standard. As a result of this review the merger may be approved as proposed, approved subject to conditions, challenged in court by the DOJ, or the license transfers may be denied by the FCC. If conditions are attached to the approval, Comcast has the option to not agree to the conditions and withdraw its application. The merger is also subject to shareholder approval and state and local scrutiny. Many proposed mergers contain a penalty clause where the acquiring party (in this case Comcast) pays some form of compensation to the party being acquired (in this case Time Warner Cable), if the transaction is not completed. May 5, 2014 .O 'T gognpo 'popmm- , goo g , q 's a X 11LULANJILiN,