Ready To Buy A Network?


Comcast chief operating officer Steve Burke briefly shook up an industry conference last week, hinting that the nation's largest MSO could be on the hunt for content, but quickly added he was not ready to make any transformational deals.

Burke, speaking at the Bank of America Merrill Lynch Media, Communications & Entertainment conference in Marina del Rey, Calif., last Wednesday, said while some companies have decided to separate their cable-distribution business from their content holdings (a la Time Warner Inc. earlier this year), Comcast believes that the two can work harmoniously together. He pointed to News Corp. and Liberty Media as successful content companies that also have distribution arms — News Corp. with British Sky Broadcasting and Liberty Media with DirecTV.

“You really can create a lot of value by putting content and distribution together, particularly if the content is cable content,” Burke said. “I think we would not be doing our job if we weren't trying to figure out how to get bigger in those businesses. If the opportunity came about where we could add cable content to our portfolio, I think we would do it.”

Comcast already has a stable of content assets — including cable channels E!, Versus, The Golf Channel, several regional sports networks and G4. The company also is an investor in Style, TV One and PBS Kids Sprout.

While Burke did not identify potential targets, Comcast has been reportedly among the early bidders for the Travel Channel and is perennially among the candidates when any programming or cable asset comes up for auction. The company has also been named as a possible suitor for NBC Universal, which, according to sister publication Broadcasting & Cable, is considering moves to change its ownership structure. Burke stopped short of claiming that Comcast was gearing up for a buying spree, adding that there is little desire for a major deal.

“I don't think that means doing a big deal with our stock,” Burke said. “I also don't think that means doing a big $50 billion acquisition. I think it's more trying to find opportunities that are complementary with our core business.”

He also appeared to put the kibosh on speculation that Comcast would buy cable systems — especially since the repeal of the 30% ownership cap. Burke said that adding scale doesn't mean as much to the company, which currently has 24 million subscribers, as it did 10 years ago when it had 8 million customers.

“We would like to get bigger if the economics were right,” Burke said. “Its pretty hard for me to see how there would be synergies on the programming side or on the hardware side when you go from 24 million subscribers to 27 [million] or 30 [million].”

That didn't stop some analysts from handicapping a Comcast distribution buy, with Citigroup media analyst Jason Bazinet opining that a merger with Time Warner Cable would not only present huge cost synergies, but would also pass regulatory muster.

In a research note, Bazinet estimated that a combined Comcast/TWC would represent $2.7 billion in synergies ($1.6 billion from lower programming costs) and at 37 million subscribers would only control 37% of the pay TV universe.

Time Warner Cable chairman and CEO Glenn Britt, speaking at the BoA conference last Thursday, declined to comment on a possible Comcast/TWC union.

Earlier, Time Warner Inc. chief financial officer John Martin tried to squash any speculation that his company, flush with about $7 billion in cash from its split with TWC in March, would use those proceeds for a buying spree.

Martin said that the company's priorities rest first in maintaining (and possibly increasing) its cash dividend and then repurchasing its stock.

“Beyond that is M&A,” Martin said, adding that any deal would have to pass stringent requirements before the company would consider it.

“We have the flexibility to do almost anything we want to do, but we don't have the strategic need to do anything,” Martin said. “That is an enviable position to be in.”