Skip to content
Link copied to clipboard

Comcast seeks support on Hill, Street

Comcast Corp. yesterday began courting Washington lawmakers and Wall Street investors to win over skeptics to its $30 billion proposed merger with entertainment giant NBC Universal Inc.

Comcast Corp. yesterday began courting Washington lawmakers and Wall Street investors to win over skeptics to its $30 billion proposed merger with entertainment giant NBC Universal Inc.

Comcast, the nation's largest cable company, with 23.9 million subscribers, announced that it would acquire a controlling interest in the NBC Universal entertainment conglomerate from General Electric Co. for an initial $6.5 billion down payment in cash and other payments over the next seven years.

The announcement ended weeks of speculation and leaks, most of them on NBC Universal-owned business channel CNBC.

Chief executive officer Brian L. Roberts said that a Comcast-NBCU merger rounded out his strategic vision and that investors should view Comcast as two distinct companies - with cable TV and broadband distribution in Philadelphia and entertainment in New York.

The deal would merge the giant cable TV and Internet distributor with one of the nation's most profitable operators of cable channels. Those channels include USA, Syfy, MSNBC, CNBC, and Bravo, as well as part ownership in History, A&E, and the Weather Channel.

"When we got in there, we were blown away with how profitable CNBC was," Roberts said in an interview when explaining his review of NBCU's operations. He said the conglomerate had five cable channels that earned $200 million a year in profit. "We were amazed at how healthy the cable channels were," he added.

But NBC Universal also operates the troubled NBC broadcast-TV network; 10 local NBC-TV stations, including Philadelphia's NBC10; the Universal Pictures movie studio; and the Universal theme parks.

Comcast-NBCU faces stiff regulatory reviews from the Federal Communications Commission and the U.S. Justice Department's antitrust unit.

Opposition from unions, public-policy advocates, and an association of small cable operators was also voiced - all concerned about the implications of a company so sprawling.

"Without broad government intervention, regulators in Washington, D.C., will see Comcast-NBCU wield its unprecedented power to drive up artificially the cost of its programming," said Matthew M. Polka, president and chief executive of the American Cable Association in Pittsburgh.

Comcast-NBCU would "leverage its enhanced market power to force other pay-television providers to distribute all of its combined Comcast-NBCU programming on basic tiers, regardless of consumer interest in paying for this content," Polka said.

Tim Winter, president of the Parents Television Council, an antiobscenity group, said: "Pairing the nation's largest cable provider with the behemoth that is NBC Universal can mean only one thing: less choice for families and consumers."

In a bid to neutralize opposition, high-ranking Comcast executive David L. Cohen pledged in a letter that the cable giant would respect the editorial independence of NBC News and that Comcast would support the flagging national NBC broadcast-TV network that is available in all American households.

In the 10-point letter, Cohen also said that Comcast, which has fought unionization in its 100,000-employee workforce, would honor union contracts at NBC Universal.

Roberts warned that if the government mandated conditions that seriously undermined Comcast-NBCU, he would not move forward with it. He said the merger would be "pro-consumer."

Comcast officials said they believed that the government had never blocked a "vertical" merger of this type and that it would win approval.

Jen Howard, spokeswoman for Federal Communications Commission Chairman Julius Genachowski, said: "The FCC will carefully examine the proposed merger and will be thorough, fair, and fact-based in its review."

Washington was not the only concern yesterday for Comcast. Wall Street was, too.

To overcome investor skepticism, Comcast said yesterday that it would boost its cash dividend 40 percent to almost 38 cents a share in January. Comcast stock rose 97 cents, or 6.49 percent, to $15.91 in trading.

The economic effect of the merger may be muted in Philadelphia, Comcast's hometown.

As part of the deal, Comcast would contribute its cable channels to NBC Universal. Stephen Burke, the No. 2 Comcast executive, said the Comcast programming operations for Versus, PBS Kids Sprout, and the Comcast Sports Group would remain in Philadelphia.

There could be some employee cutbacks in the programming arm at the Philadelphia headquarters, Burke said. "We certainly would not see a large number of head-count reductions," he said.

NBC Universal chief executive Jeffrey Zucker would remain at the helm of the entertainment company and report to Burke in Philadelphia. Zucker said yesterday that he expected a series of integration meetings between NBC Universal employees and Comcast employees over the next year.

Under the negotiated terms, Comcast would pay General Electric $6.5 billion for a 51 percent ownership interest in the joint venture that includes NBC Universal and Comcast's programming businesses.

GE also would receive cash in the deal by borrowing $9.1 billion on the joint venture. That debt would remain on the joint-venture books. NBC Universal would pay off that debt through its profits.

Comcast is expected to make two additional payments to General Electric. These payments would be a combined minimum of $5.75 billion over seven years, giving Comcast full ownership of NBC Universal.

The future success of NBC Universal will depend heavily on maintaining growth in the cable channels and a rebound in the Universal movie studio, Comcast executives said.

"This deal is a perfect fit for us," Roberts said. "We are honored that under this agreement Comcast would take over stewardship of this important collection of assets and are absolutely committed to investing in NBCU."