Comcast to Buy Patriot Media

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Includes: CMCSA, VZ
by: Judith Levy

Comcast, the U.S.'s largest cable TV provider, will plug a hole in its central New Jersey service by acquiring niche provider Patriot Media for $483 million in net cash. The purchase will boost Comcast's competitive position against rival Verizon, which is rolling out FiOS TV in the state. The deal is expected to close in Q3. Patriot's 81,000-person constituency resides in New Jersey's affluent Somerset, Hunterdon, Mercer and Morris counties, geographically complementing Comcast's existing service areas in the state. The deal values each Patriot customer at $6,000, a premium to the $4,000-per-customer value range of other cable companies. Comcast justifies the high cost by noting the high average net worth of Patriot's clientele, who are more likely to buy additional products like high-speed Internet access. Comcast spokeswoman D'Arcy Rudnay: "These systems have great demographics and are so well managed that they generate almost twice as much cash flow as the average customer." Craig Moffett, senior analyst at Sanford Bernstein, concurs: Patriot enjoys "probably the best operating metrics of any cable system in America, with spectacular demographics and very high penetration of all the advanced services."

Sources: Reuters, Newsday, Wall Street Journal, MarketWatch
Commentary: Triple-Play All The Way: A Look at the Hottest Trend in Consumer TelecomHow Verizon's FiOS Will Change the Face of the Telecom Industry
Stocks/ETFs to watch: Comcast Corp. (NASDAQ:CMCSA). Competitors: Verizon Communications Inc. (NYSE:VZ), DirecTV Group Inc. (NYSE:DTV), EchoStar Communications Corp. (NASDAQ:DISH). ETFs: PowerShares Dynamic Telecom & Wireless (NASDAQ:PTE), PowerShares Dynamic Media (NYSE:PBS), iShares Dow Jones US Consumer Services (NYSEARCA:IYC)
Conference call transcripts: Comcast Q4 2006, Verizon Q4 2006

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