The Deal: Comcast Faces New Burdens in Time Warner Bid

NEW YORK (The Deal) -- The possibility that Comcast (CMCSA)would enter a bidding war with Charter Communications  (CHTR) for Time Warner Cable (TWC) is festooned with red flags warning of the regulatory hurdles Comcast would face in Washington.

Approvals by the Department of Justice and the Federal Communications Commission are by no means a given. If the necessary government sign-offs were to be obtained, they would almost certainly come with a lengthy list of conditions aimed at preventing Comcast from abusing the market power it has by being both the largest cable system operator and a major provider of television content to harm rival TV and online content producers.

The conditions would be similar to the ones Comcast agreed to in order to win DOJ and FCC approval for NBC Universal in 2011.

"We believe government approval would be possible, but it would be costly, with serious risk. This would be a brawl," wrote Stifel, Nicolaus analysts Christopher King and David Kaut in a note to clients.

Although an acquisition would present Comcast with "significant" synergies through cuts in programming costs, corporate overhead and increased scale for equipment purchases, the analysts questioned whether the deal would be worth it, given the possibility of protracted federal review, inevitable government regulatory conditions and Time Warner's high valuation.

The companies are likely to argue that their would-be deal presents the same issues as those resolved by regulators in the Comcast-NBCU combination through numerous conditions. The vertical integration of distribution and content was the primary issue then and would be extended throughout Time Warner markets.

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