Opposition grows to Comcast-Time Warner Cable deal

Comcast (CMSCA) shares have slumped roughly 10 percent since it agreed in February to buy Time Warner Cable (TWC), with concerns growing that federal regulators may not sign off on the $45 billion deal.

Hoping to shore up support among investors, Comcast said today it would increase its share buyback program by 80 percent, to $2.5 billion, if regulators approve the transaction. How big of an "if" that might be is tough to say. Comcast has already agreed to jettison about 3 million subscribers to allay potential antitrust concerns around the Time Warner Cable, though analysts expect regulators to demand even more concessions. Proceeds from the sale would be used to fund the buybacks.

"This may have been more of a structural step," said David Heger, an analyst with Edward Jones, who rates Comcast's stock as a "buy." "I am not reading into it that it's some secret sign that they are more confident about getting approval."

Industry observers have questioned whether the Federal Communications Commission and the U.S. Department of Justice would approve the merger. Citing the Obama administration rejection in 2011 of AT&T's (T) acquisition of T-Mobile (TMUS), FCC member Ajit Pai last year told The Wall Street Journal that the odds were against Comcast-Time Warner Cable winning approval. Pai, a Republican, told the paper that a Republican administration would view such a deal more favorably.

Even so, the deal will be a hard sell.

"They have a tough road ahead," said Heger, who still expects the government to ultimately approve the merger provided that Comcast make the necessary concessions.

Other critics also are lobbying against Comcast's purchase of Time Warner Cable. Public Knowledge, a non-profit group that advocates open networks, argues that the merger would create a "dominant gatekeeper" for content providers, resulting in higher prices for consumers and fewer choices. Sen. Al Franken, D-Mont., has raised similar concerns, claiming that the combined company would use its power to limit choices and dictate prices.

Comcast rejects these claims, and notes that its service area doesn't overlap with Time Warner Cable's, the traditional yardstick that antitrust regulators have used when they determine if a merger is in the public's best interest. Consumerist, a blog put out by the non-profit parent of Consumer Reports, has claimed that Comcast's already-bad customer service would only get worse if the merger was approved.

  • Jonathan Berr

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