FCC conditions on Comcast-NBC could hurt synergy

By Yinka Adegoke and Jui Chakravorty

NEW YORK (Reuters) - Comcast Corp's bid for a controlling stake in NBC Universal to create a media powerhouse could be hurt by conflicting interests on Capitol Hill and conditions that hurt synergies, but the deal will likely be approved by regulators after a lengthy review.

Comcast and General Electric Co have been in talks to reach a deal that would give the cable operator a 51 percent stake in a NBC Universal venture. Comcast would contribute its cable networks and $4 billion to $6 billion in cash.

The two sides recently agreed to value NBC Universal at about $30 billion, sources previously told Reuters.

Final terms of a deal are expected to be announced in the coming days, according to one person close to the talks. But many months are likely to pass between signing and closing.

"Cable bashing is a nonpartisan sport," said Bernstein Research analyst Craig Moffett.

A deal would not only face a review by anti-trust regulators and the U.S. Federal Communications Commission, but it would also attract interest from Congressional committees in the middle of an election year, Moffett said.

"It is very likely that FCC regulators will take a close review of this deal," Christopher Vollmer, a partner at Booz & Co, said. "It's big, it's high profile and it involves both content and distribution assets."

The FCC could force Comcast to continue providing content to competitors such as Verizon Communications and DISH Network, even if they are unable to agree on affiliate fees.

"My fear is they could lose their leverage in negotiations," said Steve Birenberg of Northlake Capital Management, who sold his Comcast holdings in December and is waiting to see how low the stock goes before getting back in.

Comcast expects to have to make some compromises, one person familiar with the company's thinking said. For instance, it could offer to make its children's programing from its Sprout channel available on free-to-air channels. It could also offer to make more programing available for African-Americans and Latinos or more on-demand news programing.

OTHER ISSUES

Other issues bound to come up: 'net neutrality,' which bars Internet service providers from blocking or prioritizing traffic based on content, and 'a la carte' rules, which could force Comcast to offer subscribers the individual cable networks they want rather than force on them a bundle of channels.

Retransmission fees and rising cable prices for customers are also likely to be discussed.

Closing the deal could take longer than the 9 to 12 months Comcast anticipates, as members of Congress and interest groups take potshots at the deal.

"How long it takes will definitely benefit or hurt each side, given that Comcast's cash payment will be determined by NBCU's financial performance between the signing and closing of the deal," a person close to the talks said.