Perry Glasser

MERGER AMONG THE WALKING DEAD

In Business, EDUCATION, Finance, M&A, Politics, Wall Street on February 15, 2014 at 1:28 pm
DOLLAR$ MINION

DOLLAR$ MINION

A few of my minions urged Dollar$ to write more often about the corporate-financial scene.

Be careful what you wish for. If your eyes glaze, blame the minions.

The Big News last week was an M&A story. Comcast and Time-Warner Cable are seeking to merge.

This is yet another example of The Zombie Theory of Enlightened Managerial Practices.

The ZTEMP works like this: stitch together the parts of several corpses hope lightning will strike to animate the new entity.

Hey, if it worked for Dr. Frankenstein, who is to say the Wizards at Morgan Stanley or Goldman cannot work the same magic?

Investment bankers are spraying their shorts dreaming of the coin to be made. Dollar$ looks for the cost of Manhattan bedbug havens to soar this bonus season. Cocaine may be in short supply. The waiting list for a new Lamborghini may grow to beyond a year.untitled

However, for those of us who think of the tube as a cost center rather than a profit center, it may be educational to consider what will be going down.

The two companies are expecting regulatory resistance because the resulting entity will be HUMONGOUS. Congressional Weasels (so coy they are disguised as marmosets) will grunt their solemn grunts about protecting the peoples’ interests; then they will step aside to let the deal go down.

Who is kidding whom? We all know that cable TV is already a monopoly in most places, and we all accept exorbitant cable bills and packages that disallow subscription by station. Packages are how cable providers optimize receipts by forcing us to pay for several steaming portions of fried garbage along with a few ounces of steak.

But the industry is among the walking dead because more and more people no longer do their viewing via cable. Both Comcast and Time Warner Cable seem not to have noticed the internet. More and more of us binge watch only what we want after legal (or illegal) downloads from services that cost $100/year (or are free) instead of $100/month.

So when Dollar$ reads that Comcast will pony up $45 billion for the acquisition of about 11 million TW subscribers, dumping 3 million of them to satisfy charges of monopolistic practices, netting about 8 million subscribers, he thinks short this stock!

For the match-challenged Dollar$ reader, to break even Comcast needs to recoup about $5,500 per subscriber. With the average consumer cable bill just under $100 per month, or about $1100 per year, Comcast needs to squeeze 5 years of receipts out of its new subscribers.

On Wall Street, five years is a glacial epoch. Comcast will try to do it in three, and they will fail, because to do it in three they will have to raise subscriber rates.

But the more they raise rates, the more subscribers will say “Take this cable box and shove it,” before turning to the Internet to view the shows they want, when they want, for free or at a price point that approaching zero.

Zombies may walk on Wall Street, but only because Buccaneers operate the strings of soon-to-be dead marionettes.

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