Yesterday, Bloomberg reported that Comcast Corp. (CMCSA) is considering increasing its share buy-back program by over 80% in 2014, if its decision to acquire Time Warner Cable Inc. (TWC) receives shareholders’ approval. Earlier, Comcast announced a stock repurchase program of $3 billion in 2014. However, the board of directors may increase this program by authorizing another $2.5 billion in the same year.
In Feb 2014, Comcast reached an agreement with Time Warner Cable to acquire the later in an all-stock deal valued at around $45.2 billion. The merged entity will have around 33 million pay-TV (video), 32 million high-speed broadband (Internet) and 16 million telephony (voice) subscribers. The deal is expected to face tough scrutiny and close monitoring by the regulator, Federal Communications Commission (FCC).
According to sources, in order to avoid monopolistic power restriction, Comcast has decided to divest around 3 million Time Warner Cable video subscribers to maintain its total market share at 30% of the U.S. pay-TV industry. Several industry researchers have valued these 3 million subscribers between $17.5–$18 billion.
FCC may ask Comcast to spin-off these subscribers as a separate entity. This will create another formidable player in the U.S. cable TV market with the fourth largest subscriber base.
Liberty Media Corp. (LMCA), which controls a 27.3% stake in Charter Communications Inc. (CHTR), is aggressively pursuing the idea of Charter Communications acquiring Time Warner Cable. However, it lost out to Comcast in the bid.
Nevertheless, Liberty Media recently hinted that Charter Communications may opt for these 3 million subscribers, who will be divested by Comcast. Bloomberg reported that Comcast may further increase its share buy-back program as the subscriber disinvestment is expected to generate significant amount of money to its balance sheet. Comcast currently carries a Zacks Rank #3 (Hold).
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