Category Archives: M&A

AT&T, Cable companies, Cablevision, Carriers, CenturyLink, Charter, Comcast, CST, DirecTV, DISH, Earnings, M&A, Satellite, Time Warner Cable, Verizon

Analysis of Q1 2014 cable, satellite and telco numbers

I’ve been gathering data on the major US cable, satellite and telecoms providers for the last few weeks, as they’ve been reporting earnings. This post compares their consumer financials – revenues, profits, ARPU, as well as their subscriber growth (shrinkage), and draws conclusions about the state of the market and prospects of individual players. It also provides some analysis of the likely impact of the announced merger between Comcast and Time Warner Cable and the rumored merger between AT&T and DirecTV.

A full set of diagrams and charts in addition to analysis is available in this slide deck on SlideShare (which is also embedded below).

Continue reading →

Apple, Apple Music, Beats, M&A

Apple & Beats

In what must be an enormously frustrating development for Apple PR, rumors of Apple acquiring Beats for around $3.2 billion broke last night on the Financial Times website. I say frustrating, because if there’s one company that likes to control the message on a new announcement, it’s Apple. And it’s so hard to evaluate this deal without all the details – to my mind, we’re missing three crucial bits of information (besides official confirmation that a deal has been done): the actual price, and the currency (i.e. cash, stock etc), Beats’ financials (helping to know whether the valuation is reasonable) and the strategic rationale. The rumor is that the price is $3.2 billion, but there are no details on the currency. There have been rumors about Beats’ financials, but nothing official from the company itself. And it’s the last point – the strategic rationale – that has everyone scratching their heads.

I don’t have any inside information on any of these three questions, but I thought I’d share a few data points by way of illustrating possible reasons for the deal.

Digital content sales are declining

Firstly, what’s been happening to Apple’s digital content business over the last couple of years. I’ve excerpted the relevant sentence(s) from the company’s SEC filings, and there’s a clear trend emerging:

Apple digital content remarks from SEC filings Continue reading →

Intel, M&A, TV, Verizon, Video

Verizon, Net Neutrality and Intel

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This past week has seen two major news items featuring Verizon: the defeat of the FCC’s net neutrality regulations in court, which was instigated by Verizon, and the acquisition by Verizon of Intel’s Cloud TV business. So far, I haven’t seen many articles drawing a connection between the two, but in reality they’re both part of the broader picture of Verizon’s video strategy.

FiOS has been the focal point of Verizon’s video strategy

That strategy was kicked off years ago, when Verizon launched its first video services over 3G and then over its FiOS networks. Over time, those two efforts were united to some extent as a more coherent video strategy emerged, and  it eventually became clear that FiOS was the focal point of Verizon’s video strategy, with mobile efforts merely appendages to that. The FiOS video offering has since grown to five million subscribers, representing just over a third of the homes where it is available. This business generates several billion dollars a year in revenue for Verizon, alongside FiOS broadband and voice services, and represents Verizon’s main video business today.

However, Verizon appears to recognize that this opportunity may be under threat from trends in the market. A recent interview with the guy who heads Verizon’s consumer and small business wireline operations, Bob Mudge, hints that the company sees the writing on the wall for traditional pay-TV services from cable and satellite companies and telcos:

The pay-TV market is shrinking. It’s a slow shrinkage…
Data connectivity is what you must have. That gives the customer more options, whether to get traditional video or to use that data pipe for over-the-top (OTT) video and other online applications.

The key point here is that Mudge recognizes that many consumers will not want to buy classic pay-TV services, and that many of their needs may be met by other options. I think he’s wrong about broadband being the key service (though it’s understandable why he’d make that argument given Verizon’s strength in this area). Consumers fundamentally want content, not connectivity. Connectivity is a means to an end, and if it’s the right combination of fast and good value, they won’t care who they get it from. The TV offering is going to be the key differentiator in the consumer space, not broadband.  Continue reading →

Carriers, M&A, Sprint, T-Mobile

Why Sprint – T-Mobile makes sense

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There were rumors today – not for the first time – that Sprint might be interested in making a bid for T-Mobile. This is not all that surprising given recent remarks from T-Mobile execs and Dan Hesse that they would be open to a merger. But there’s been a predictable outcry about the possibility of the US’s three major carriers being whittled down to two, and especially about the presumed loss of T-Mobile’s recent disruptive approach to the industry.

There are several good reasons to take this view:

  • T-Mobile has indeed been disruptive, and has caused real change in the industry. Its shift away from 2-year contracts and towards easier, more frequent upgrades sparked the other major carriers to follow suit. It has won subscribers from Sprint and AT&T in particular as a result.
  • There’s an instinctive reaction to a reduction in the number of players in any industry, and it would follow years of consolidation in the US wireless market. It’s easy to argue that a market dominated by three players would be less competitive than one with four major players.
  • The US has a huge population, and it seems like it ought to be able to support four or more players without too many problems, given that there are other markets around the world with more players and much smaller populations.
  • The two carriers use incompatible network technologies. After Sprint has worked so hard to eliminate iDEN and WiMAX and focus on its core CDMA, EVDO and LTE networks, it would be a shame to complicate things by adding T-Mobile’s GSM-based networks to the mix. Given the focus on LTE this might be less complicated than it once was, but it’s still a non-trivial issue.

However, I think this knee-jerk reaction opposing any consolidation among the big four may be misguided, and here are the reasons. Continue reading →