Why Comcast and Time Warner Cable Dodged a Bullet (CMCSA, TWC)

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The rumors were true. Comcast Corporation (NASDAQ:CMCSA) walked away from its $45 billion deal to buy Time Warner Cable Inc (NYSE:TWC) because of regulatory pressures.

Comcast CMCSA Time Warner Cable CMCSA TWCSo … now what do they do?

Although the Comcast-Time Warner tie up ended in failure, consolidation still rules the cable industry. This won’t be the end of dealmaking — not by a long shot.

Indeed, the market and industry analysts are already speculating as to other potential targets for CMCSA, and they could be outside the cable industry or even the country.

Among the ideas bandied about by analysts are that Comcast should buy a wireless company or expand internationally. It could even buy an enterprise network operator along the lines of Level 3 Communications, Inc. (NYSE:LVLT).

Some observers note that the end of the Comcast-Time Warner deal is the best thing that could have happened to CMCSA, since it will force the serial acquirer to go after targets with greater growth prospects.

One thing that is almost certain — Comcast mentioned it — is an increase in stock buybacks. Indeed, the likelihood of greater share repurchases (and the case that the deal was widely expected to come apart) held CMCSA stock rise on the news.

TWC Better Off Without CMCSA Too

As for Time Warner Cable, the company said it’s still laser-focused on operational improvement, and remains a potential buyer or seller in any future deal.

And TWC’s role as a target could re-emerge soon. Charter Communications, Inc (NASDAQ:CHTR) has an agreement in place to buy privately held Bright House Networks, LLC, but the deal was contingent on a successful marriage of Comcast and Time Warner Cable.

Charter wanted Time Warner before it took second prize in the Bright House deal. It’s no stretch to expect Charter to come back to TWC now, and reports broke out Friday afternoon that CHTR was preparing its own bid for Time Warner.

Investors can expect CMCSA to find other prey and TWC to find another partner. Perhaps most importantly, anyone betting on further consolidation in the cable industry is not likely to be disappointed.

After all, there’s no shortage of smaller players looking to get in the mergers and acquisitions game. Charter Communications, Cablevision Systems Corporation (NYSE:CVC) and privately held Cox Communications, Inc. and Bright House can’t run the risks associated with being a minor players in an increasingly costly industry well past its prime.

Bottom Line

CMCSA stock rose fractionally Friday on news that the deal would not close, while TWC stock was up some 5% between that news and the Charter reports.

It appears that in both cases, the market is looking forward to something better coming along.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/04/comcast-time-warner-cable-cmcsa-twc/.

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