Weekly Pay-TV Notes: TWC-Charter To Merge; FCC Yet To Resume AT&T-DirecTV Review; Bill Murray Christmas Special On Netflix

The pay-TV industry saw significant activity this week, with Time Warner Cable agreeing to merge with Charter Communications. On a separate note, the FCC has not yet resumed its review of the AT&T-DirecTV merger. In yet another, Netflix is set to air A Very Murray Christmas starring Bill Murray and a host of other stars in December. On that note, we discuss below these developments related to the pay-TV companies over the past few days.

Time Warner Cable To Merger With Charter

Time Warner Cable (NYSE:TWC) and Charter Communications (NASDAQ:CHTR) announced Tuesday that they have entered into a definitive agreement to merge. ^[1] Charter is a leading internet communications company and the fourth-largest cable operator in the U.S. As per the announcement, Time Warner Cable (TWC) shareholders will be paid $195.71/share, which represents a 14% premium to the stock’s May 22 closing price. Charter will provide $100 in cash and the rest in shares of a new public parent company, tentatively called “New Charter”, for each TWC share outstanding. The TWC-Charter deal puts TWC’s enterprise value at $78.7 billion. ^[2] Charter had earlier agreed to buy Bright House Networks and the Syracuse-based company will also be a part of New Charter. This deal is the latest to be announced in a cable communications industry that is undergoing a consolidation phase.

Time Warner Cable was initially set to merge with Comcast (NASDAQ:CMCSA). However, with all the regulatory uncertainty hanging over the deal, Comcast decided that the best course of action would be to drop the merger plans altogether. ^[3] We believe that the current TWC-Charter deal will face fewer regulatory hurdles as compared to the now defunct Comcast-TWC deal. (Read in detail – Our Thoughts On The Time Warner Cable-Charter Merger)

Time Warner Cable’s stock gained around 6% through the week. For the year 2015, we estimate revenues of $23.9 billion, compared to consensus estimate of $23.7 billion, and EPS of $8.03, compared to a consensus estimate of $7.65.

AT&T-DirecTV Deal Shot Clock Still Paused By FCC

The Federal Communications Commission (FCC) is yet to restart the official shot clock on its review of the AT&T (NYSE:T)-DirecTV (NASDAQ:DTV) merger. ^[4] The commission had earlier paused its review of the proposed merger along with that of the now-defunct Comcast-Time Warner Cable merger, citing a pending court ruling. ^[5] A U.S. Appeals Court has since decided on the matter and the FCC is now free to formally restart its review of the proposed merger.

The shot clock counts down an informal 180-day period, at the end of which the FCC announces its final decision regarding the fate of the merger in question. The clock on the AT&T-DirecTV merger was stopped in March at day 170. The FCC is expected to wrap up its review of the merger soon as other deals are piling up for review. The FCC will soon need to focus its attention on the recently announced Altice – Suddenlink and Time Warner Cable – Charter deals. ^{[6] [7]}

DirecTV’s stock declined around 0.6% through the week. We currently have a price estimate of $95.1 for DirecTV. For the year 2015, we estimate revenues of $34.4 billion, in line with the consensus estimate, and EPS of $5.89, compared to a consensus estimate of $5.88.

Netflix Ropes In Bill Murray For Chrismas Special

Streaming giant Netflix (NASDAQ:NFLX) is all set to air A Very Murray Christmas in December. ^[8] The special will star Bill Murray as himself along with other stars such as George Clooney, Chris Rock, Amy Poehler, Miley Cyrus, Michael Cera, David Johansen, Maya Rudolph, Paul Shaffer, Julie White, Dimitri Dimitrov, Jason Schwartzman, Jenny Lewis and Rashida Jones. The special will be written by Bill Murray, Sofia Coppola and Mitch Glazer and directed by Sofia Coppola. The Christmas special is an impressive addition to Netflix’s content and its star power could be a big draw for the streaming company during the festive season.

Netflix’s stock gained around 2.2% over the week through Thursday. We currently have a price estimate of $549 for Netflix. For the year 2015, we estimate revenues of $6.79 billion, compared to consensus estimate of $6.78 billion, and EPS of $1.52, compared to a consensus estimate of $1.57.

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1. Charter Communications to Merge with Time Warner Cable and Acquire Bright House Networks, May 26, 2015, Time Warner Cable Press Release [↩]
2. Time Warner Cable’s SEC Filings [↩]
3. COMCAST/TIME WARNER CABLE/CHARTER TRANSACTIONS TERMINATED, April 24, 2015, Comcast Press Release [↩]
4. FCC Yet to Restart AT&T/DirecTV Shot Clock, May 28, 2015, Broadcasting & Cable [↩]
5. FCC Stops the Clock Again on Comcast-TW Cable, AT&T-DirecTV Merger Reviews, March 13, 2015, Variety [↩]
6. Altice Deal To Buy Suddenlink Could Make Patrick Drahi A U.S. Media Mogul, May 20, 2015, Deadline [↩]
7. Charter announces plan to buy Time Warner Cable and Bright House, CNN Money [↩]
8. Bill Murray Christmas Special Coming to Netflix, May 22, 2015, Variety [↩]