Comcast-MediaOne Merger: A Giant Step in the Cable Industry

Strategic Insights -

The $44.3 billion stock-swap deal between Comcast Corp. and MediaOne Group Inc. is the largest merger in the cable industry's history, aiming to create a media supermarket offering TV, phone service, and high-speed Internet hookups. This acquisition would combine the No. 3 and No. 4 players in the country, with Comcast nearly doubling its subscribers to 11 million in 33 states. Consumer advocates are concerned about rising cable rates, which have increased faster than inflation, and the impending relaxation of government rate regulations. Cable operators are merging to gain financial clout and a large subscriber base to offer an increasing number of channels and new services.

Key Takeaways:

  • The Comcast-MediaOne merger is the largest in the cable industry's history, with a value of $44.3 billion.
  • The new Comcast would have 11 million subscribers in 33 states, making it the third-largest cable system operator in the country.
  • The merger would allow Comcast to nearly double its subscribers and provide a strong financial foundation to offer new services.
  • Consumer advocates are concerned about the impact of the merger on cable rates, which have increased faster than inflation.
  • The relaxation of government rate regulations on March 31 could lead to even faster rate increases.
  • Cable operators are merging to gain the financial clout and subscriber base needed to offer an increasing number of channels and new services.
  • Comcast will inherit MediaOne's nearly 25% stake in Time Warner Entertainment, which holds most of Time Warner's cable systems, the Warner Bros. studio, and HBO.
  • Time Warner supports the deal and its CEO has expressed confidence in the merger's success.

Statistics:

  • The nation's largest cable system operators by number of subscribers, assuming the completion of the Comcast-MediaOne merger, are: Time Warner Inc. (12.6 million), AT&T Corp. (12.5 million), Comcast Corp. (11 million), Adelphia Communications Corp. (4.7 million), and Cox Communications Inc. (3.8 million). (Source: Company reports)
  • More than 77% of the nation's 98.1 million TV-viewing homes had cable last year, up from nearly 70% a year earlier. (Source: Industry reports)
  • The merger would give Comcast a 9.5% market share, followed by AT&T's 9.5%, and Time Warner's 10%. (Source: Industry reports)

Sources:

  • Company reports
  • Industry reports