Comcast maneuvers to smooth way for deal

Moving swiftly to regain regulatory momentum for its proposed $45.2 billion acquisition of Time Warner Cable Inc., Comcast Corp. on Monday announced a complicated set of steps to divest 3.9 million cable-TV subscribers.

The divestiture, valued at $19.5 billion, involves 900,000 more TV subscribers than Comcast originally agreed to shed to obtain regulatory approvals when it announced the giant deal for taking over Time Warner Cable in February.

The plan would give rival Charter Communications Inc. 1.4 million former Time Warner Cable customers. In a remarkable move, 2.5 million Comcast subscribers would go to a newly created and publicly traded cable-TV company. Charter would own 33 percent of the new company, named, for the time being, SpinCo.

The maneuvers would lower Comcast's share of cable-TV subscribers nationally to below 30 percent, a key benchmark, Comcast believes. The Philadelphia company would have about 30 million cable subscribers if the deals close. Charter would be the nation's second-largest cable company.

Consumer groups oppose Comcast's proposed acquisition of Time Warner, saying the size of the new company would be bad for consumers and online video providers that compete with cable companies.

Comcast and Time Warner stock prices increased Monday. Comcast closed at $51.70, up 1.43 percent. Time Warner closed at $140.95, up 1.1 percent.

U.S. senators on the Judiciary Committee seemed skeptical in a recent hearing in Washington of the potential consumer benefits of a transaction that would combine the No. 1 and No. 2 - Time Warner Cable - cable operators. Sen. Al Franken (D., Minn.) said he was against it, and Comcast officials acknowledge that the deal would not lower cable bills or even slow cable-TV rate increases.

The Federal Communications Commission and the Justice Department's Antitrust Division are evaluating the proposed merger. Most observers say the agencies will approve it, with conditions. Federal regulators will now simultaneously evaluate the proposed divestitures that carve up Time Warner Cable among Comcast, Charter, and a new company, and will involve separate voluminous government filings.

Brian Roberts, Comcast's chief executive officer and chairman, said Monday the deals would leave Comcast at the subscriber levels of 2002 and 2006, when Comcast acquired, respectively, AT&T Inc.'s broadband business and parts of Adelphia Communications Corp.

"Transforming three giant companies into two behemoths gives no comfort to content providers or consumers," Matt Wood, policy director of the nonprofit Free Press, said Monday. "Lawmakers and antitrust authorities shouldn't be fooled either."

The deal would be a win for Stamford, Conn.-based Charter, which had planned a hostile takeover of Time Warner Cable before Comcast made its move. Craig Moffett, one of the nation's leading telecommunications analysts, said, "Charter will leave her [TWC] courtship with a sizable consolation prize."

Because of how Comcast has structured the divestiture of subscribers, Charter could double its subscriber base after four years, Moffett said. Charter shares soared 7.7 percent Monday, closing at $140.05.

The three-part divestiture transaction is contingent on the Comcast deal for Time Warner Cable's closing.

First, Charter would acquire 1.4 million Time Warner Cable subscribers for $7.3 billion.

Second, Comcast, swelled by acquiring Time Warner, would swap 1.6 million subscribers to cluster cable-TV systems for advertising, network build-out, and customer service; 1.6 million Charter subscribers would go to Comcast and 1.6 million Comcast subscribers to Charter.

These swaps would not affect Comcast subscribers in Philadelphia and would tighten Comcast's hold on TV markets in New York, Boston, Dallas, Los Angeles, and Silicon Valley. Charter would grab more subscribers in Ohio, the Midwest, and the Southeast.

Third, Comcast would spin off 2.5 million TV subscribers to the new company. Charter would acquire 33 percent of the new company. Comcast shareholders would own the remaining 67 percent.

Michael Angelakis, Comcast chief financial officer and vice chairman, said Monday the transaction was designed for tax efficiencies and to deliver cost savings to the companies.

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