Gentlemen, Start Your Engines: Time for Another Round of Cable Deals?
Did a federal court just give underemployed M&A guys a boost? Could be: The United States Court of Appeals in Washington, D.C., has overturned a longstanding cap on cable-system ownership.
If the court’s decision holds up, it could well start another round of dealmaking similar to the one we saw at the beginning of this decade in which the industry consolidated to about half a dozen major players.
“The commission has failed to demonstrate that allowing a cable operator to serve more than 30 percent of all cable subscribers would threaten to reduce either competition or diversity in programming,” the court said.
The judges pointed to rising competition among video providers, including satellite companies like DirecTV Group Inc, as well as telephone companies like AT&T Inc and Verizon Communications Inc, which have been rolling out their own subscription television services.
“Cable operators, therefore, no longer have the bottleneck power over programming that concerned the Congress in 1992.” the court said. The FCC’s cable ownership limit has been the focus of court challenges for years.
As Reuters points out, new FCC Chairman Julius Genachowski can try to appeal the decision or try to write a new one. But if the cap stays off, we’re likely to see another round of combinations, or attempted combinations, at the very least.
Lots of handicappers have already been expecting big cable operators like Comcast (CMCSA) to make a run at programming assets, as it did with Disney (DIS) years ago. But what if the company deploy its assets to bulk up with more subscribers instead? Investors in Cablevision (CVC), the smallish, New York-based cable system that is a perpetual supposed takeover target that never gets taken over, like the idea: CVC shares are climbing modestly in a flat market.
