By Shalini Ramachandran
Comcast Corp. and AT&T Inc. have made audacious moves to
become media distribution and content conglomerates, but one of the
industry's most powerful players is skeptical of that approach and
doesn't plan to follow suit: cable tycoon John Malone.
In an interview this week, Mr. Malone, a pioneer of the cable
industry who owns significant stakes in No. 2 U.S. cable operator
Charter Communications and cable-channel owner Discovery Inc., said
he doesn't plan to consolidate his empire into a vertically
integrated content and distribution player any time soon.
"Why would I put Discovery together with Charter? Apples and
oranges," Mr. Malone said. "If you are just forming a conglomerate
by putting everything in the same bucket, it eliminates your
flexibility, you've got tax problems, regulatory problems and a lot
of problems that these companies operating autonomously don't
have."
Mr. Malone said there may be smaller content opportunities for
Charter, including teaming up with other distributors in a joint
venture to own content companies. It could also buy regional sports
networks, regional news or Spanish-language assets, he said.
AT&T's acquisition of Time Warner Inc. is on the brink of
closing after the companies defeated an antitrust lawsuit this
week. Comcast, which already owns NBCUniversal, is bidding for 21st
Century Fox Inc. entertainment assets against rival Walt Disney Co.
The two companies have said that marrying content and distribution
will help them create streaming products and give them access to
consumer data that will allow them to better compete against tech
giants for ad dollars.
Mr. Malone, a deal maker guru whose ideas carry weight in the
industry, said AT&T and Comcast face a challenge in deriving
financial benefits from such deals. He said AT&T would have an
easier time reaping benefits because of its national footprint,
which would allow it to use Time Warner's entertainment content,
including cable channels like HBO and CNN, to drive revenue growth
in its wireless business.
Comcast, in contrast, still only operates in some regions of the
country. "If I was [Comcast Chief Executive] Brian Roberts, I would
probably have a content company and a cable company instead of one
company. Maybe I would have done better, maybe not," he said with a
laugh.
Charter, like Comcast, is regional. It is only available in
"maybe 30% of the U.S.," while the content business today requires
global scale, he said.
Targeting Spanish-language media would make sense for Charter,
he said, because Hispanics are "heavily concentrated" in the
company's markets. One such asset is Univision Communications Inc.,
the largest Spanish broadcaster in the U.S., whose private-equity
owners have been eager for an exit.
Univision is "a valuable asset," Mr. Malone said. But "is it
worth what people will sell it to you for?"
Last year, Mr. Malone and Discovery Chief Executive David Zaslav
made an unsuccessful run at Univision, offering more than $12
billion for the company, which Univision rejected, The Wall Street
Journal has reported.
Other U.S. content companies, including Viacom Inc., CBS Corp.,
AMC Networks Inc. and Hollywood studio Lions Gate Entertainment
Corp., are ripe for a roll-up, Mr. Malone said. "How do these
companies evolve in this world of giants...where Disney can buy
this piece of Fox and they are still tiny compared to Facebook and
Apple?"
Mr. Malone helped shaped the modern media and cable industry,
helping fund the creation of networks such as CNN and BET. Though
he sold his then-No. 1 cable company Tele-Communications Inc. in
1999 to AT&T, he has made a comeback in recent years, including
by orchestrating Charter's acquisition of Time Warner Cable Inc. in
2016.
Besides Discovery and Charter, he also has interests, personally
and through various holding companies, in companies including
Hollywood studio Lions Gate, international cable operator Liberty
Global PLC, Sirius XM, Formula One, internet-radio service Pandora
and home shopping channels.
"There are some synergies amongst companies that we have a stake
in that we're still exploring" that could lead to deals, Mr. Malone
said.
Last year, Verizon Communications Inc. and Japanese conglomerate
SoftBank Group Corp. made merger offers to Charter, which Charter
rebuffed as too low. Verizon bid in the $350-a-share range while
Softbank's offer was at $540 a share in cash and stock, which
included contributing Sprint shares at roughly $10 a share, people
familiar with the matter said. Now, Charter's shares have fallen
sharply on cord-cutting worries and are trading at around $295 a
share.
Mr. Malone said "there was a logic" in a Verizon-Charter
combination to accelerate the deployment of the next-generation
wireless broadband technology called 5G. He said Verizon hasn't
recently made another approach.
SoftBank, he said, was offering a "a complex transaction" and in
the end it required Charter to acquire wireless carrier Sprint
Corp., which is controlled by SoftBank. "There were real questions
about the value of Sprint," he said.
While Charter's internet business is strong, Mr. Malone said its
challenge is managing through cord-cutting and developing
direct-to-consumer streaming products beyond the big cable bundle.
"The big question is: How does the video part of their business
evolve?" Mr. Malone said.
(END) Dow Jones Newswires
June 14, 2018 19:22 ET (23:22 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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