Split of Time Warner Cable Inc may consolidate industry, circumvent regulatory challenges- report
A Bloomberg report said the split of Time Warner Cable Inc may facilitate industry consolidation and enable firms to circumvent strict scrutiny by Federal regulatory authorities. Comcast Corp and Charter Communications Inc are said to be mulling over a joint bid for the firm and then breaking up the company between them. The strategy is similar to the joint acquisition of Comcast and Time Warner of Adelphia Communications Corp in 2006. The purchasing firms then split up the acquired firm between themselves.
Comcast has thought about making a solo offer for Time Warner Cable but this strategy will be viewed more strictly by the Federal Communications Commission and antitrust regulators, the report said. The merger of two of the biggest cable firms in the US will result to a company that will hold nearly three quarters of the cable subscribers in the US.
In an interview with Bloomberg, ISI Group Analyst Vijay Jayant said, "A joint deal takes away all the issues of the transaction -- including regulatory concerns for Comcast -- and it makes it easier for Charter to get some financing since it's not as large."
According to Bloomberg's sources, Comcast and Charter are still in preliminary talks. One option that the companies are considering is that of the breakup of Time Warner Cable. The split deal is increasingly becoming more appealing to both firms since portions of Time Warner Cable will fit with the various areas covered by the two cable providers, the sources added.
However, Axinn, Veltrop & Harkrider lawyer John Briggs told Bloomberg that Comcast and Charter will have to prove to regulators that they will be able to break up the assets of Time Warner Cable and still promote industry competition. Briggs said, "The idea would be they wouldn't really eliminate competition. There would be two companies and not have a dominant company. It will get scrutiny. It will not sail through."