Weekly Pay-TV Notes: Charter Helps Comcast-TWC Deal Move Forward, FCC Pauses Major Deal Reviews And TWC declares Dividend

March 20th, 2015 by Trefis Team
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The pay-TV industry saw significant activity this week, with the Comcast-Time Warner Cable deal getting a boost from the shareholders of Charter Communications. On a separate note, the FCC stopped its review of DirecTV-AT&T and Comcast-TWC mergers pending a court ruling on a related issue. In yet another, Time Warner Cable announced a quarterly dividend of $0.75 to be paid in April. On that note, we discuss below these developments related to the pay-TV companies over the past few days.

Charter Shareholders Approve Issuance of Shares Related To Comcast Deal

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Charter Communications (CHTR:NASDAQ) stockholders recently approved the issuance of shares of common stock of New Charter. [1] New Charter has been created to acquire approximately 33% of the shares in a Comcast (NASDAQ:CMCSA) subsidiary, Midwest Cable, Inc. This deal was designed in order to help Comcast get the required regulatory approvals for its merger with Time Warner Cable (NYSE:TWC) as it will reduce Comcast’s post-merger share of the pay-TV market to below 30%. [2] The FCC had previously used 30% as a strict limit on the maximum allowable market share for one company and the proposed reduction of market share below this limit will project this merger in a more favorable light. (Read More – Comcast-TWC Merger Makes Sense Despite Ever Growing Opposition) The FCC has recently paused the review of this merger along with the AT&T-DirecTV deal. [3] (Read More – FCC’s Recent Rulings Add Uncertainty To Time Warner Cable’s Deal With Comcast)

Comcast’s stock declined around 0.5% over the week through Thursday. We currently have a price estimate of $62.41 for Comcast. For the year 2015, we estimate revenues of $71.6 billion, compared to consensus estimate of $71.4 billion, and EPS of $3.26, compared to a consensus estimate of $3.24.

FCC Pauses Review Of DirecTV-AT&T and Comcast-Time Warner Deals

As alluded to above, the FCC has paused its review of the proposed merger of DirecTV (NASDAQ:DTV) with AT&T (NYSE:T) along with its review of the Comcast-Time Warner Cable deal. [4] The FCC has further stated that it can restart the review as it sees fit. The commission stopped both reviews citing a pending court ruling on the issue of sharing sensitive information about pay-TV carriage contracts with third parties. Several media houses, including CBS (NYSE:CBS), Disney (NYSE:DIS) and Viacom (NASDAQ:VIA) have protested the FCC’s plans to allow certain third-parties to view parts of their contracts with Comcast and DirecTV. The FCC has countered that disclosure of the information is necessary for the outside parties to give their opinion on the proposed mergers and has assured that such third parties will be bound by a protective order. The commission had also paused the review last October as it needed more time to look into the same issue. [5]

DirecTV’s stock gained around 1% over the week through Thursday. We currently have a price estimate of $95.1 for DirecTV. For the year 2015, we estimate revenues of $34.6 billion, in line with consensus estimate, and EPS of $6.07, compared to a consensus estimate of $6.00.

Time Warner Cable Announces Quarterly Dividend

Pay-TV operator Time Warner Cable (NYSE:TWC) recently announced a quarterly dividend of $0.75 per share on the Company’s Common Stock. [6] The dividend will be payable in cash on April 22 to stockholders of record at the close of business on April 1. The company had paid a similar dividend to its shareholders on March 16 and is on track to pay an annualized dividend of $3.00 in 2015. [7] The company had reported its fourth quarter and full year earnings on January 29th in which the subscriber numbers were very positive for the company. The full year increase to the high speed Internet subscriber base was 657,000 as compared to 211,000 in 2013. [8] The company also lost fewer Pay-TV subscribers in 2014 as compared to the previous year.

Time Warner Cable’s stock gained around 0.5% over the week through Thursday. We currently have a price estimate of $157.8 for Time Warner Cable. For the year 2015, we estimate revenues of $23.8 billion, compared to consensus estimate of $23.9 billion, and EPS of $8.28, compared to a consensus estimate of $8.10.

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Notes:
  1. Charter Shareholders Overwhelmingly Approve Issuance of Shares in Transactions with Comcast, March 17, 2015, Charter Investor Relations [↩]
  2. Comcast in deal with Charter, April 28, 2014, Reuters [↩]
  3. FCC Puts Review of Comcast-Time Warner, AT&T-DirecTV Deals on Hold, March 13, 2015, Wall Street Journal [↩]
  4. FCC Stops the Clock Again on Comcast-TW Cable, AT&T-DirecTV Merger Reviews, March 13, 2015, Variety [↩]
  5. FCC stops clock on Comcast, AT&T-DirecTV reviews, The Los Angeles Times, Oct 22, 2014 [↩]
  6. Time Warner Cable Declares Quarterly Dividend, March 17, 2015, Time Warner Cable Investor News [↩]
  7. Time Warner Cable Declares Quarterly Dividend, February 12, 2015, Time Warner Cable Investor News [↩]
  8. Time Warner Cable’s SEC Filings [↩]