NEW YORK (TheStreet) -- "The combination of Time Warner (TWX) Cable and Comcast (CMCSA) (CMCSK) creates an exciting opportunity for our company, for our customers and for our shareholders," said Comcast CEO Brian Roberts.
But is it really?
The Time Warner-Comcast deal is expected to create a massive subscriber base of 30 million for Comcast, plus proceeds of $7.3 billion. That cash will come from Comcast's sale of cable systems with 1.4 million subscribers to Charter Communications (CHTR) in order to gain regulatory approval for the Time Warner acquisition.
The merger places Comcast in the lead of the cable communication world. Let's look at whether the deal is worth it from a business and finance standpoint.So what are the potential pitfalls? 1. Not focusing on the voice and video business Cable TV is fast becoming a thing of the past. All the major TV providers lost a collective 113,000 subscribers in Q3 of fiscal 2013, with Time Warner Cable losing a whopping 306,000 TV subscribers. Tom Rutledge, CEO of Charter Communications, was "surprised" that 1.3 million of his 5.5 million customers opted out of the TV option. In fact, the video and voice businesses have shown the slowest growth for Comcast, while Time Warner Cable's video and voice business shrank in 2013. It can be safely concluded that, with the massive $45.2 billion deal, Comcast was not looking to improve its cable TV business. So, then, what is it looking for, and what does it stand to gain by the deal? 2. Net broadband subscriber growth is slowing Time Warner Cable is a leader in deploying community Wi-Fi, with more than 30,000 hotspots, primarily in Los Angeles and New York City. The only effective step toward online video streaming is a far stronger presence as an Internet service provider. With the merger, Comcast mainly aims to magnify its market position in the Internet world. In fact, as reported last week, the company intends to put up 8 million Wi-Fi hotspots in the U.S. by the end of 2014. But strangely, the net additions of broadband subscribers aren't doing much. Comcast added 1.16 million broadband subscribers in 2011 and 1.30 million in 2013. Are U.S. Internet subscribers gradually moving on to better options? What's going on? In truth, there are several other high-speed options available for U.S. Internet consumers these days. According to Pcmag.com, Verizon (VZ) Fios and Midcontinent are the top two Internet service providers when it comes to speed.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV