Media conglomerates and mergers

[Nathanael D. Striker]

http://money.cnn.com/2018/04/29/news/companies/t-mobile-sprint-merger/index.html

 

T-Mobile and Sprint are giving a merger another go, with T-Mobile gaining control over the combined company. Normally, this merger wouldn't sit well with me, but the entrance of Comcast into the market, the merging of Data, TV, and Internet, and the upcoming transition to 5G makes this an interesting thing to consider. Those factors should lessen the worry of this merger. Thoughts?

[Dad]

Are you prepared for "package deals" and fake savings?

[Nathanael D. Striker]

Are you prepared for "package deals" and fake savings?

I got a nice MVNO that I can get a year's worth of service for $180, so I already have my savings. And that's always a worry, isn't it?

[Nathanael D. Striker]

The monopolization of America continues. Earlier this week, Sprint and T-Mobile announced a $26 billion merger, consolidating their power to compete with Verizon and AT&T. If the deal goes through, only 3 companies will dominate the wireless industry.

 

Such mergers are giving a handful of corporations increasing market power across the economy. This concentration of power not only results in less choice and higher prices for consumers, but it also increases the clout of corporate executives over our political system.

 

Looks like the battle lines are being drawn on this one already. Honestly, why blame T-Mobile and Sprint for trying to keep up in the market?

[Phantom Roxas]

Because as he's saying, it's monopolizing market power. They key point of the AT&T / Time Warner merger is that it's a vertical merger, and they needed to prove that they would not be reducing competition, while Disney/Fox or Sprint/T-Mobile are expected to face higher scrutiny because they do reduce competition. While I understand that Sprint and T-Mobile are trying to keep up in the market - specifically to compete with AT&T - that was the same excuse AT&T used, that they need to keep up with FAANG. If these companies keep needing to bulk up with mergers and acquisitions to keep up, it really is just going to consolidate the market even further.

 

To put it another way, if you have somewhere between 15 to 20 different companies of equal status all competing in the same industry, merging one or two of them may not be so detrimental to the industry. But when you have four clear leaders in the mobile business, reducing that to three will do a lot more to reduce competition, and fewer choices for customers. While this just a single anecdote from one person among millions, I saw someone complaining that they moving away from Sprint to T-Mobile, only to now find that the two are merging anyway. It makes it harder for consumers to believe they have much freedom in choosing which carrier they go with if those carriers are just going to keep consolidating.

 

Masayoshi Son (CEO of SoftBank, which owns a majority in Sprint) does seem to be getting what he wants, although this also kind of further highlights some of the other issues. Not just with mobile consolidation, but with consolidation in general. With SoftBank and Deutsche Telekom both having stakes in Sprint and T-Mobile respectively, which would continue on with the combined company, it further highlights that sense of monopoly, as some of these companies are just arms of other companies. From what I've gleamed, this wasn't necessarily just Sprint and T-Mobile deciding to merge. This was Masayoshi Son investing in Sprint until he had enough influence within the company to direct it to merge with T-Mobile. It's not about what these individual companies decide; they're merely at the whims of their shareholders.

[Nathanael D. Striker]

I think the one thing people don't realize about this industry is the Economy of Scales involved. You need a lot if capital to get a viable network situated, and the move to 5G makes the acquisition of capital even more necessary. As for competition, Comcast entered the market (using Verizon service iirc, but still selling it as their own) and there are a good pool of MVNOs existing. Also, Google Fiber exists. So while there may be a few big players, there are still a good amount of smaller players at it.

[Dad]

Smaller players will collapse under the weight of billion dollar companies by sheer reputation alone.  Your choices amount to:

 

T-mobile

Verizon

At&T

 

Those other guys who you can't actually name and whose services you aren't familiar with because they can barely afford advertising.

[Phantom Roxas]

I think the one thing people don't realize about this industry is the Economy of Scales involved. You need a lot if capital to get a viable network situated, and the move to 5G makes the acquisition of capital even more necessary. As for competition, Comcast entered the market (using Verizon service iirc, but still selling it as their own) and there are a good pool of MVNOs existing. Also, Google Fiber exists. So while there may be a few big players, there are still a good amount of smaller players at it.

 

As Dad mentioned, there are smaller players you can't actually name. You mention a good amount of smaller players, but who else do you have? Comcast may be entering the market, except they are also one of the major players in cable. Half of this thread has already been about Comcast's own bidding war with Disney and Fox, with Comcast potentially planning a hostile takeover of Fox just to spite Disney. This goes back to the other I mentioned, where some operations are just branches of other monopolies. Can you name some smaller players that aren't just involved in other markets, and aren't the ones that smaller companies need to compete with?

 

The "G" in FAANG stands for Google, so I'm not sure if you were referring them as an example of smaller players, or making a separate point, but Google is not someone I would consider a smaller player. They are merely another bigger player involved in an industry that they aren't yet dominating the same way they run everything else.

 

I understand that companies need to adapt in the pursuit of 5G, and this merger is meant to get a foothold once that tech takes off. Sony's mobile division is the least profitable side, to the point that they've just reported a devastating loss in the recent fiscal year. The only reason Sony is still staying in the mobile market is because they're also trying to take advantage of 5G.

 

https://www.phonearena.com/news/Sony-keeping-Xperia-smartphone-business-due-interest-5G-technology_id104563

 

Moving to 5G is a double-edged sword. While you're correct that mergers and acquisitions are necessary to thrive, it risks the idea that monopolies are necessary for the advent of 5G.

[Nathanael D. Striker]

Mint Mobile, which I currently use, US Cellular, Straight Talk, etc. Those are what I can think of on the top of my head. Perhaps US Cellular is the best example.

[Phantom Roxas]

Only heard of Straight Talk, but I think Dad's point still stands. How long do you expect them to stand on their own in the shadow of these big four, soon to be three?
 

---

All things considered with the Sky bidding war, Brian Roberts claimed that "We didn’t choose to put Sky in play. That event happened around us." Personally I find that idea ridiculous. Yes, it happened around him, but he absolutely jumped on that, and yet he's acting like his hand is being forced. I don't think there's any doubt that Comcast is using Sky as nothing but a stepping stone for a Fox deal.

 

And I don't really see why Comcast exactly wants Fox? Yes, I understand the general appeal of acquisitions and mergers, and Fox wants a buyer. Any buyer, really. These are desirable assets, but when Disney announced their deal, all other potential bidders seem to be willing to walk away from this, except Comcast.

 

So it just seems like Comcast is only doing this to retaliate against Disney. It's not so much that Comcast wants Fox, but rather that Comcast wants Disney to not have Fox. It just seems so... petty, to be instigating this bidding war seemingly because Brian Roberts still holds resentment towards Disney rejecting Comcat's hostile takeover from over a dozen years ago. It makes it difficult to imagine how committed Comcast would be to this bidding war. Even if they were to one-up Disney, what exactly would they do with Fox's assets if they were to acquire them?

[Nathanael D. Striker]

I'm surprised you haven't heard of US Cellular, they are the #5 company in the US. Yes, they have their own towers iirc, and they seem to be doing just fine. And honestly, I expect some of the smaller MVNOs to do fine, especially Mint Mobile with their bulk discount plans. Though, the smaller players go for the niches, I do admit that. The wireless industry is a "natural" oligopoly for the reasons stated previously. Sure, we could go towards regional, but then the economies of scale suffer. There is no winning tbh.

[Phantom Roxas]

Apologies if this seems like a weak argument, but maybe that might indicate either the gap between the top four mobile providers and anything lower in the rankings? That or most of the stores and sites I visit only ever emphasize those four, so the others just seem neglected by comparison. Whenever I go to an electronics store, or an area with dedicated mobile stores, I'm typically going to see AT&T, Verizon, Sprint, and T-Mobile. I would probably have to go out of my way to find US Cellular, searching for stores or online, rather than walking into an area that just happens to have the other four. While I'm only speaking for my personal experience, again it does seem to suggest what Dad means about paying for advertisers. Those smaller companies simply do not have the benefit of advertisement like the top four do.
 
http://www.latimes.com/business/hollywood/la-fi-ct-viacom-cbs-shares-20180504-story.html
 
Shari Redstone has made a concession that if CBS and Viacom were to reunite, Bob Bakish may not need to play a prominent role in management, as Redstone has demanded in the past. However, it does not seem like the two companies are much closer to reuniting. This is still a slow burn and could easily fall through, but I'll be providing updates regardless.
 
https://www.hollywoodreporter.com/news/uk-regulator-sends-final-report-foxs-sky-bid-government-1105701
 
Regulators have sent the U.K. government a final report regarding Fox's bid for the remainder of Sky. Culture secretary Matt Hancock must then make a decision by June 13 on whether to approve or reject the deal. That deadline is a day after the deadline for the final ruling on the AT&T/Time Warner merger, so one way or another, Disney and Comcast's bidding war for Fox and Sky is sure to escalate that week.

[Nathanael D. Striker]

I'll concede that point to you as US Cellular has less than 6 million subscribers, and the only store in Oregon that I know of is in The Dalles. I only know about them since my family had them given they were one of the only providers other than Verizon who could get service in Tygh Valley, do I imagine their niche is rural areas.

 

EDIT: Mainly Central and Southern Oregon as they have locations in Bend, Hoodriver, Roseburg, and Redmond as well. Still, mainly rural.

[Phantom Roxas]

https://www.hollywoodreporter.com/news/uk-regulator-sends-final-report-foxs-sky-bid-government-1105701

 

Regulators have sent the U.K. government a final report regarding Fox's bid for the remainder of Sky. Culture secretary Matt Hancock must then make a decision by June 13 on whether to approve or reject the deal. That deadline is a day after the deadline for the final ruling on the AT&T/Time Warner merger, so one way or another, Disney and Comcast's bidding war for Fox and Sky is sure to escalate that week.

 

And a day after that, Comcast's bid for Sky will face a decision of its own. So the decisions on the AT&T/Time Warner merger, and Fox and Comcast's respective bids for Sky will all occur back to back.

[Dad]

Nothing good will come of a Fox/Disney merger. It'll only make Disney a bigger conglomerate.

[Phantom Roxas]

I hate this scenario because whoever wins, we lose. I'd prefer if both mergers were blocked, because I don't think Comcast would be much better than Disney, and would also become an even bigger conglomerate if they get Fox.

[Phantom Roxas]

https://www.hollywoodreporter.com/news/disney-could-give-up-sky-get-fox-assets-1110153

 

Take this with a grain of salt, as this is only speculation. It's suggesting that Disney may give up Sky to focus their acquisition of Fox, though since Bob Iger has described Sky as a "crown jewel", I can't see Disney wanting Fox without Sky as well. The theory is that Disney could get Fox while Comcast gets Sky, but I believe it would be the other way around. Disney primarily wants Sky, and acquiring Fox is more of a middleman. Comcast wants Fox directly, and is only bidding on Sky so they have a level playing field with Disney in the bidding war.

 

Unless anything major happens, I wouldn't much to change until the AT&T/Time Warner decision, so I may try to focus on other mergers. I feel any news I may otherwise post would be redundant.

 

Speaking of…

 

https://www.washingtonpost.com/politics/cohens-600000-deal-with-atandt-specified-he-would-advise-on-time-warner-merger-internal-company-records-show/2018/05/10/cd541ae0-5468-11e8-a551-5b648abe29ef_story.html?noredirect=on&utm_term=.de3ada0a6c98

 

AT&T paid POTUS attorney Michael Cohen for advice on the merger. While I'm not aware of any problems inherent to that (It sounds like it would be a conflict of interest at most, but that would not be illegal in and of itself), it's a little bit ridiculous how some relatively recent events are tied together.

[Phantom Roxas]

http://deadline.com/2018/05/cbs-files-suit-national-amusements-breach-fiduciary-duty-1202390313/

 

So… um. I'm kind of impressed with CBS, because they just filed a suit against National Amusements and Shari Redstone to block the forced CBS-Viacom. Their goal is to dilute National Amusement's voting shares, and possibly even become an independent company.

[Phantom Roxas]

https://www.bloomberg.com/view/articles/2018-05-14/cbs-coup-attempt-against-redstones-isn-t-a-cause-for-celebration

While the internal strife between CBS, Viacom, and the Redstone family, one thing that has come up is whether Verizon may attempt to buy CBS, which could be a better deal for CBS rather than a forced reunion with Viacom. Another option is basically a mix of both options, where CBS and Viacom are merged, and then that combination would in turn be sold to Verizon. One of the main sources of contention in the lawsuit is that Shari Redstone seemed to have intervened on a potential deal between CBS and Verizon, so it may be safe to assume that Verizon would be welcomed as a potential buyer. The issue is whether CBS would agree to be bought by Verizon by itself, or if CBS would want to be a part of Viacom if a Verizon deal does come up.

 

There's not much indication that Verizon would want Viacom. Viacom's involvement here is largely because of Shari Redstone, and while CBS and Viacom do seem to having talks - Shari's defense is even that she would not force a merger that the companies did not want - they don't seem to be wanting it under Shari's own terms. So in this case, we're looking at two separate mergers: Verizon-CBS, and CBS-Viacom. The primary issue here is how those mergers overlap.

 

I see those possibilities as very different mergers, however. CBS-Viacom would probably be closer to a horizontal merger than a vertical, and while there could be concerns of how this further aids monopolies, the two companies are already majority owned by National Amusements anyway, and the framing of this merger has always been in the perspective of a reunion. It would still be consolidation, though regarding how National Amusements is structured, it may be closer to streamlining assets that a company already owns, rather than something on the scale of Disney and Fox. That said, my problem here is more with regards to who is in control here. If it's just CBS-Viacom, then it's more than just that National Amusements owns that combination. It's already being controlled Shari Redstone, and the prospect of a single family being what we could associate as the owners of a large company doesn't sit right with me.

 

Though that's why I find it hard to believe another theory people have, which is that Shari may want to sell the CBS-Viacom combination to Verizon. I suspect that she would not want to go through the trouble of reuniting the companies only to sell that to Verizon, especially when CBS is angry that Shari stopped Verizon from making any sort of deal. If she reunites CBS and Viacom, she'd probably want to stay in charge of that.

 

As for Verizon's own perspective, I suppose I understand it. While it's funny that Verizon has been mocking the Sprint/T-Mobile merger, ultimately Verizon is not making any major M&A's. The last big one I can think of was Yahoo!, except Yahoo! was already on such a downward spiral that it was more of a mercy killing at best, and then folding Yahoo! in with AOL to create Oath. Compared to AT&T/Time Warner and Sprint/T-Mobile, Verizon needs their own acquisition that can be seen as competing with that. They were among the potential suitors for Fox last year, but lost out on that, and with the impending Disney vs. Comcast bidding war, Verizon may want to stay clear of Fox specifically, but still pursue another company to acquire.

[Phantom Roxas]

http://variety.com/2018/tv/news/comcast-sky-fox-bid-regulatory-scrutiny-britain-1202817607/

 

Matt Hancock has preliminarily decided that Comcast's interest in Sky does not raise concerns that would warrant any kind of intervention.

 

While this stage of the bidding war seems to be in Comcast's favor, an official final decision won't come for another three weeks, so he could still intervene.

[Phantom Roxas]

http://variety.com/2018/biz/news/comcast-outbid-disney-21st-century-fox-1202819572/

 

Comcast formally announces that they'll be bidding for Fox.

 

So… here's a dumb question I haven't thought to ask yet. How come U.K. regulators are against Fox buying Sky, and leaning towards allowing Comcast to potentially acquire Sky, but now Comcast is trying to buy Fox and Sky? Considering that the combination of Fox and Sky is itself a problem, I highly doubt that Disney and Comcast will have it easy trying to acquire that combination.

[Nathanael D. Striker]

http://variety.com/2018/biz/news/comcast-outbid-disney-21st-century-fox-1202819572/

 

Comcast formally announces that they'll be bidding for Fox.

 

So… here's a dumb question I haven't thought to ask yet. How come U.K. regulators are against Fox buying Sky, and leaning towards allowing Comcast to potentially acquire Sky, but now Comcast is trying to buy Fox and Sky? Considering that the combination of Fox and Sky is itself a problem, I highly doubt that Disney and Comcast will have it easy trying to acquire that combination.

Is it sad that I want Disney to win the Doc bidding war? I mean, they'd make better use of Fox than Comcast would imo. Though, I imagine Sky is the real prize for both?

[Phantom Roxas]

I also want Disney to win, though I think it is sad because both options risk creating a monopoly.

 

And yeah, I feel like Disney would make more use of Fox. As for Sky, it's not the real prize for both. It certainly is for Disney, but not Comcast. Disney is buying Fox to get Sky, although Fox itself also compliments Disney. In Comcast's case, they only want Fox, but because of the Disney/Fox and Fox/Sky mergers, I believe Comcast's approach is that they have to bid for Sky as a stepping stone to bid for Fox. So Comcast couldn't care less about Sky beyond how it plays into acquiring Fox.

[Phantom Roxas]

Well, it's been a week since I update this thread, and plenty has happened in that time.

 

https://www.reuters.com/article/us-sprint-corp-m-a-t-mobile-us/u-s-senate-panel-to-hold-hearing-on-sprint-t-mobile-merger-idUSKCN1IO2ID

 

The U.S. Senate will hold a hearing on the Sprint/T-Mobile merger on June 27. Considering how it's two weeks the other merger madness coming up, this should hopefully give it a bit more distance to stand on its own.

 

https://www.bloomberg.com/news/articles/2018-05-29/nai-files-suit-against-cbs-seeking-to-invalidate-dilution

 

National Amusements - or more specifically, just Shari Redstone - has cooled interest in merging CBS and Viacom. Redstone has confirmed the theory that her plan was to sell a combined CBS and Viacom. However, since CBS and Les Moonves have rejected the plan, Redstone may be stepping back from this deal. Right now, the main concern here is the lawsuit against Redstone, so we'll see where that goes, though I may not post on that too much, because while the lawsuit was prompted by the merger, I don't think it necessarily contributes much to the discussion here.

 

https://nypost.com/2018/05/28/antitrust-professor-att-time-warner-merger-is-in-trouble/

 

Analysis suggests that the government may succeed in blocking the AT&T/Time Warner deal. We still have a couple of weeks to see the decision there, but we are getting close.

 

---

Now for some updates on the Disney v. Comcast bidding war for Fox and Sky.

 

There's a good here article explaining Sky's position in all this. I was skeptical that if Fox alone is facing scrutiny for trying to acquire Sky, and that the combination of Comcast and Fox would be another problem, but this touches on how that would be more of a benefit. Essentially, Sky is bound to be bought up no matter what. The question is if, rather than any sort of bidding war for Sky, Fox could partner up with either Comcast or Disney to acquire Sky. That still puts the focus of the bidding war on Fox, though ultimately would result in Fox acquiring Sky.

 

Despite declaring their intent to make a bid, Comcast has yet to formally do so. As such, Fox and Disney have announced that they will be conducting a shareholder meeting on July 10. This puts more of a deadline on Comcast to make their bid, though they have nearly a month between when the AT&T/Time Warner trial ends and when this meeting will be held. It's possible that the meeting could be postponed, but at least we're getting more progress on this deal.

 

Sticking with Deadline, they go more into detail about why Comcast is trying to buy Fox. It's the usual "They need to bulk up to survive against FAANG", and really reiterates what I'm saying that I don't believe Comcast actually wants Sky, so much as they need Sky to get Fox. The theory is that whoever gets Fox will be the last "old media" to carry on into the next age of the media landscape, and whoever loses Fox is going to be at a serious disadvantage. While I think Disney will survive even if they don't get Fox, for Comcast I believe that this deal could very easily make or break them. Heck, this might break Comcast even if they win, since Comcast could be in serious debt from the purchase alone. The most I can think of is that Fox would get saddled with debt like Toys R Us did. So I don't see Comcast as necessarily wanting to use Fox in and of itself, and they'd only have Fox take the fall for them. Which… really just seems like business suicide, not trying to survive against FAANG. It would remove Fox as a player, and Comcast would end up back at square one.

 

But that's all assuming Comcast even gets far enough. Disney is supposedly preparing to offer an even bigger deal for Comcast. While that move was to be expected, I believe this is the first we've heard of Disney actually taking those steps. Disney would have five working days to prepare their counter offer if Comcast makes their own, so if Comcast makes their bid before Disney and Fox's shareholders meeting, then Disney would likely make their own counter before then as well. I don't know if Disney is waiting for Comcast's deal so they can raise their offer accordingly, or if they'll jump the gun and raise their offer before Comcast makes theirs.

 

We'll see what happens in two weeks, between the rulings on the AT&T/Time Warner deal, and Fox and Comcast's respective bids for Sky. Those three rulings should all be the catalysts for the next stage for these bids.

[Phantom Roxas]

The AT&T / Time Warner merger trial will get its final ruling in one week. Since that's going to open the floodgates to the Disney vs. Comcast bidding war for Fox and Sky, then this was timed perfectly.

 

https://variety.com/2018/tv/news/fox-comcast-sky-bids-approved-1202830510/

 

Fox and Comcast have both been granted approval to pursue buying Sky. Comcast's bid seems to have no strings attached, since Comcast is not seen as presenting the same regulatory concerns, but Fox is only being allowed to buy Sky on the condition that they sell Sky News to a third party, and to provide funding for Sky News over the next ten years.

 

Fox has previously suggested the possibility of selling Sky News directly to Disney. While Disney would own Sky News regardless, the particular concern has always been to allow Sky News independence from the Murdoch family, so while it would technically be a divestiture, ultimately it would just rearranging different parts of Sky. Matt Hancock aims to consult with Fox on final terms for a Sky News sale within the next two weeks.

 

https://www.reuters.com/article/us-sky-m-a-comcast-eu/eu-antitrust-regulators-to-rule-on-comcast-sky-deal-by-june-15-idUSKBN1I90UQ

 

However, Comcast still faces a separate review from the European Union. The Union did give Fox approval over a year ago to acquire Sky, but this could still be a roadblock for Comcast. That ruling will come by June 15.

 

Considering how messy it is, here's a recap on the deals either already in play, or expected to occur:

- Disney wants to buy Fox.

- Comcast wants to buy Fox.

- Fox wants to buy the rest of Sky.

- Comcast wants to buy Sky.

- Sky News may be sold to a third party, which may be Disney or someone else.