With regulators, senators, and all sorts of allies lining up against its proposed purchase of TW Cable and no breakup fee to worry about, Comcast is said to be yielding the field of battle. Reports say they may do it later today, deciding not to pursue what would be a difficult and probably fruitless trip through the courts. So what happens next?
I mean other than Charter dropping its other deals and submitting another bid for TW Cable. That part is pretty much a given, whether TW Cable holds still for it or not.
Comcast's hurdle in buying TW Cable was simply that it would wield too much last mile power, and it wasn't willing to divest the things it might use that power to benefit, like NBC Universal. So if as a cable operator, Comcast can't really grow inorganically from here by any significant percentage in the US, what do they do?
Option 1: They could look at international assets, much as AT&T has been doing for wireless growth down in Mexico since the T-Mobile deal collapsed. Comcast as the next Liberty Global? I don't really see it, but you never know.
Option 2: Go organic. The OTT threat may still loom over the traditional consumer cable business, but it still makes a heck of a lot of cash flow. And there is still significant growth to be had in the enterprise space.
Option 3: Stop trying to buy cable assets, and step out of the cable franchise territory as a network operator into the broader market. Maybe buy a national network operator with a medium-large enterprise customer base. The synergies would have to be pretty significant, and the regulators wouldn't even blink.
Option 4: Go wireless. Buy T-Mobile.
Personally, I think option #3 looks like the way to go. Cable MSOs have dabbled in metro fiber and CLEC M&A, but only in a very targeted way that didn't take them too far out of their comfort zone. But Comcast has found the regulatory limits of where the cable franchise footprint will take them organically. That means it's time to step beyond Type II connectivity to the rest of the world.
Who would be the target of a hypothetical Comcast looking to buy competitive network assets on a national scale? XO springs to mind, as does Cogent. Of course, they have the resources to go after Zayo or Level 3 too, but I think the other two are probably more readily available.
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