November 26, 2013

Will Comcast merge with Time Warner?

What would the cable industry look like if the largest and second-largest companies in the U.S. attempted a merger? We may be about to find out. 

According to reports by USA Today, representatives from Time Warner Cable reached out to Comcast to discuss such a proposal after some shareholders from both parties noted that regulatory changes might allow it to go through.

These talks are being held in response to the changing television marketplace. Thanks to the growth in online content providers, fewer households are subscribing to cable. Some believe that the major cable providers will have to join forces just to survive.

Technically, Comcast should be able to buy part or even all of Time Warner. The former has a market capitalization of $130 billion, while the latter is worth $38 billion. However, many observers familiar with the deal have been telling news sources that obstacles remain in the way.

"It isn't clear how serious Comcast is about pursuing a deal for Time Warner Cable, and one of the people cautioned that Comcast may opt out of the deal-making altogether," Shalini Ramachandran, Dana Cimilluca and Brent Kendall wrote in the Wall Street Journal.

On the other hand, they added that since cable operators work in different geographical areas, rather than competing directly, regulators may allow it.

However, if Comcast is going to try for a technology acquisition, it needs to act soon. Reports suggest that Charter Communications, based in California, may also be interested in buying Time Warner. It is possible that a merger between smaller companies would have a better chance of being approved in Washington.