RPT-DEALTALK-Comcast unlikely to do big deal despite FCC win

(Repeats story sent Wednesday, Sept 9)

* Comcast not likely to make large buy - exec

* Potential targets include Charter cable systems

* Court ruling makes life easier for Comcast - Gabelli

By Yinka Adegoke

NEW YORK, Sept 10 (Reuters) - Comcast Corp CMCSA.O will likely explore small- to mid-sized acquisitions rather than pursue a big deal despite winning a court case that struck down a rule limiting the cable company to no more than 30 percent of the U.S. pay-TV market.

Many had thought Comcast’s win would kick start industry consolidation, but upon reflection Wall Street analysts do not think the No.1 U.S. cable company, which has around 25 percent market share, will have the appetite for major cable deals.

Comcast Chief Operating Officer Steve Burke said on Wednesday the ruling was no surprise and it did not change the Philadelphia 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.”

One reason for this approach is Comcast doesn’t believe there are significant cost benefits in negotiating programming contracts or buying set-top boxes whether it has 24 million customers or 27 million.

Analysts said potential targets for Comcast could include some of the individual cable systems of bankrupt cable operator Charter Communications CHTRQ.PK or a small- to mid-sized cable company such as Mediacom MCCC.O or Insight Communications rather than a mega-merger of cable companies.

Such acquisitions will likely involve hundreds of thousands of additional subscribers, up to perhaps around 1 million.

The ruling will allow Comcast Chief Executive Brian Roberts to breath easier in any future deal talks, said one major cable investor.

“To the degree that you’re Comcast and you want to buy Charter, or some assets of Charter, it makes life easier,” said veteran cable stockholder Mario Gabelli of Gamco Investors, which holds Comcast shares.

Charter, controlled by Microsoft co-founder Paul Allen, could decide to sell off some cable systems after it comes out of bankruptcy to further reduce its onerous debt load, said Collins Stewart analyst Thomas Eagan. The Charter case is still dragging through the U.S. bankruptcy court.


Still, Tuna Amobi, equity analyst at Standard & Poor’s, believes that the environment under the current Obama administration is less conducive for consolidation than under the previous government.

“I won’t be surprised if the Obama-appointed FCC chairman revises the challenge,” Amobi said in reference to the ownership regulations that were the subject of the court ruling.

And the larger potential targets such as Cablevision Systems Corp CVC.N and Time Warner Cable Inc TWC.N are unlikely to be in Comcast's sights, the analysts said.

They said such a large bid would also be unappealing to investors as well as regulators at the Federal Communications Commission and possibly the Federal Trade Commission.

If Comcast does have an interest in consolidation it will be more with content companies such as cable networks rather than cable systems. In the last year it has shown interest in cable networks like The Weather Channel and The Travel Channel.

“When you look at the big media companies, the best businesses that all of us have in the entertainment business are the cable content channels,” said Burke. “I think (Comcast) wouldn’t be doing our job if we didn’t try to figure out a way to get bigger in those businesses.”

Buying cable networks solves many problems for Comcast. Such an acquisition is more favorably viewed by Wall Street, which likes the dual revenue streams of the networks from pay-TV affiliate fees and advertising. Owning more networks also improves the cable company’s leverage in programming deal negotiations.

But Burke was again quick to end any speculation of a mega deal for cable content. Comcast failed in an attempt to buy Walt Disney Co DIS.N for $54 billion in 2004.

“I also don’t think that means doing a big $50 billion acquisition. I think it is more trying to find opportunities that are complementary with our core business, (Reporting by Yinka Adegoke and Herb Lash, editing by Leslie Gevirtz)