Comcast CFO: Company won't buy Sky with its stock
Cable giant Comcast Corp. takes another step toward acquiring Europe's Sky as it releases first-quarter earnings. The company lost 96,000 TV customers but added 379,000 internet subscribers.
Comcast Corp., facing push back on Wall Street over its $31 billion deal for European TV distributor Sky, won't use its own stock to pay for the acquisition because the share price is too low, Comcast chief financial officer Michael Cavanagh told analysts Wednesday.
Cavanagh made the comments as he discussed Comcast's first-quarter earnings, which were released that day.
"I don't see us using stock at these levels — period," Cavanagh said in the conference call on how the company would pay for a big acquisition such as Sky.
Because of its strong balance sheet, Comcast could borrow and then pay down the debt, Cavanagh said.
Comcast shares responded on Wednesday, rising 91 cents, or more than 2 percent, to $34.26, though they remain well off their 52-week high of $44 a share.
With a low share price, Comcast would have to use more shares to pay for Sky than if the share price was higher, hurting current shareholders by diluting their holdings.
Cavanagh and Comcast CEO Brian Roberts reiterated that they believed Sky was a good fit for the Philadelphia cable giant, despite skeptics. Comcast formalized on Wednesday its bid for Sky with U.K. regulators. Sky, a satellite-TV operator with both a streaming service and a content business, has more than 23 million customers in the U.K. and Europe, and an annual revenue of just under $18 billion. The total price with debt will be about $40 billion.
"Sky has a strong business, excellent customer loyalty, and a value brand," Roberts said in a statement. "It is led by a terrific management team who we look forward to working with to build and grow this business."
Rupert Murdoch-controlled 21st Century Fox also is attempting to buy Sky, but regulators have stood in his way. Comcast's offer for at least 50 percent of Sky is 16 percent higher than Fox's bid. Experts believe that Comcast could get into a bidding war for Sky with either Fox or the Walt Disney Co.
Revenues for Comcast were $22.8 billion in the first quarter, compared with $20.6 billion in the year-ago period. Profits were $3.1 billion compared with $2.6 billion.
The company said that the Super Bowl game in early February between the Eagles and the New England Patriots, and the Winter Olympics, also televised in February, accounted for $1.6 billion of the revenue. Those two events helped boost Comcast Corp.'s revenues by 10.7 percent even as telecom competition and cord-cutting ate into its television customer base.
Comcast lost 96,000 Xfinity TV customers in the quarter, a contrast to the 42,000 it added a year ago, but added 379,000 new high-speed internet customers as the company inexorably shifts away from TV distribution and into what it calls a "connectivity" business.
Comcast noted that first-quarter cable-TV revenue declined 0.8 percent.
"Our focus is very much centered on broadband," Comcast Cable head Dave Watson said. "We will continue to compete in video but our focus has shifted to connectivity."
Among its new products are mobile phones, which Comcast markets as Xfinity Mobile. Comcast added about 200,000 smartphone subscribers in the first quarter and lost $189 million on the business. Comcast executives say Xfinity Mobile will be profitable when the business gets larger.