- Summary: The FCC is today expected to approve the sale of Adelphia's cable systems today. The $17 billion sale of Adelphia is expected to close July 31st, adding 3.5 million subscribers to Time Warner and 1.8 million to Comcast. Time Warner presense and ability to compete with satellite TV will be significantly strengthened in Los Angeles, Dallas, Cleveland and parts of New York, and Comcast's in Miami, northern Virginia, Boston, Minneapolis and Pittsburgh. Time Warner will reach 75% of LA households, up from 15% today, but will have to fight high penetration of satellite TV and telco-provided broadband. The increased reach from the acquisition of Adelphia's systems makes it feasible for Time Warner to launch a national advertising campaign on broadcast TV. It plans to promote phone service, functionality that allows viewers to see programs from the beginning even if they started watching when the show had already started, and interactivity. Consolidation in the cable industry will likely continue.
- Comment on related stocks/ETFs: Incrementally positive for Time Warner (TWX) and Comcast (CMCSA). Incrementally negative for telco competitors AT&T (T) and Verizon (VZ) and satellite competitor DirectTV Group (DTV).
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