NBC Still Looks Like a Good Deal to Comcast
The guys from Comcast sounded pretty enthused this morning about their deal to take over NBC Universal.
Even though $36 million in operating and financing costs associated with NBCU mean that the cable giant’s second quarter earnings per share declined 6%, “we’re more excited about the prospects of this combination now than when we first announced the transaction last December,” Comcast CEO Brian Roberts said during the company’s earnings call with analysts. Back then, NBC was reeling from a terrible advertising slump and the fiasco of putting Jay Leno in prime time.Things have changed.
“It certainly feels like everything major is going our way,” added Comcast COO Steve Burke.
Comcast hasn’t always been so lucky in the past.
“In every deal it seems like from the time you announce to the time you close a number of things inevitably go wrong. What’s been really exciting about NBC Universal is that since we announced the deal in December, there have been mainly positive turnarounds.” Burke said.
In addition to a marked improvement in the ad business, Burke pointed to some improvements in financing the deal and what he called “creative improvements” at NBC and its cable channels.
Burke is heavily engaged in making plans for how Comcast will run NBC Universal after the transaction closes, which is expected by the end of the year.
“We’re meeting weekly to identify growth opportunities in order to hit the ground running when the deal closes,” he said. “We’re careful about the rules and regulations regarding this, but we’re planning both administratively and strategically for the business post-close. ”
At least one analyst isn’t nearly as thrilled with Comcast buying NBC.
After Comcast’s earnings were announced, Craig Moffett, senior analyst at Sanford C. Bernstein, wrote that the regulator review of the deal “will bring with it myriad conditions that will materially impact future cash flows . . . and the exact nature of those conditions remain highly uncertain.”
The way Comcast and other cable operators have been yanking high-speed Internet customers away from the phone companies adds to the new regulation the company will likely face, he says.
“Unfortunately, regulation would create - almost by definition - an asymmetry; unlimited downside risk, but starkly capped upside, Moffett says. “Given those risks, we remain on the sidelines.”