UPDATE 1-Citi analyst calls for Comcast-Time Warner combo

Thu Sep 10, 2009 9:07am EDT

*Citi analyst calls for merger of Comcast, Time Warner

*Sees costs savings of about $2.7 billion

*Says potential of deal should support share prices

NEW YORK, Sept 10 (Reuters) - A prominent analyst on Thursday called for a merger of Comcast Corp (CMCSA.O) and Time Warner Cable (TWC.N), saying such a blockbuster deal would offer a host of benefits for both cable giants.

Citi analyst Jason Bazinet, in a note to clients, said a deal between Comcast and Time Warner would give the combination 37 percent of the pay TV market plus offer about $2.7 billion in cost savings. Shares of both companies, he predicted, will trade higher on a potential announcement.

Bazinet's prediction comes on the heels of a court case that struck down a rule limiting cable companies to no more than 30 percent of the U.S. pay-TV market.

While the decision opens the door to more dealmaking, other industry analysts cautioned that Comcast would likely look toward small- to mid-sized acquisitions rather than pursue a big deal [N09365118]. Comcast currently has about 25 percent of the pay TV market.

Comcast Chief Operating Officer Steve Burke said during a presentation that the ruling did not change the top cable company's world view.

"We don't wake up every day saying how do we get bigger in cable," said Burke speaking at an investor conference. "But if there is a way to acquire cable systems for what we consider to be a good price, ones that are contiguous or well-managed, we would certainly look at whatever was out there."

In his note, Citi's Bazinet listed seven benefits of a combination of Comcast and Time Warner, saying among them it would lead to cost savings, offer an investment grade rating, and simplifies a wireless strategy.

(Reporting by Paul Thomasch, editing by Dave Zimmerman)

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