Analyst: Looming Verizon/Cable Deal Conditions

During the past couple weeks, some industry players and select consumer groups have voiced their opposition to the $3B mega-deal between Verizon Wireless and Big Cable. However, while many analysts believe the proposal will likely be approved, the real question becomes not if the deal will close, but what conditions will regulators impose.

Calling Sen. Herb Kohl (D-WI) "a good barometer of Democratic thinking," Stifel Nicolaus's Chris King said Tuesday the antitrust subcommittee chair recently suggested the imposition of spectrum divestitures on Verizon Wireless while ensuring the two sides' marketing agreements within the company's wireline footprint didn't raise anti-competitive concerns. In addition, the analyst said both the FCC and the Dept. of Justice are now at a phase in the discussions that will determine what type of steps both sides will have to take in order for the deal to go through.

For Verizon Wireless's part, King says the key question is how much cable AWS spectrum it would have to give up. The company has said it would sell its lower 700 MHz A- and B-block licenses if its proposed spectrum purchases are approved, but industry reports seem to suggest Verizon may have to part with the coveted spectrum.

"We're skeptical such divestitures would be massive and could well target mostly smaller markets, but some significant markets could still be affected," King writes. "Verizon said it would exceed the FCC's spectrum screen post-transaction in a total of 46 counties of 18 cellular market areas, including Minneapolis-St. Paul, Raleigh-Durham, and Toledo, though it said competition there was strong." Critics want the FCC to adjust the screen and force larger divestitures, he said.

As for the shared marketing arrangements between both sides, King says it could be "more problematic for cable than Verizon if they're scaled back or significantly altered." The analyst said while regulators may focus on Verizon's wireline region, there still could be other conditions/concessions "extracted" from the companies in order to gain approval. No "show-stoppers," though. •

Analyst: Wave 'Bye-Bye' to Public/Private Valuations

This week, private equity firms Oak Hill Capital Partners and GI partners announced they were buying Wave Division Holdings from Sandler Capital Management. While financial details remain undisclosed, several reports peg the value of the deal at approximately $950M... which, one analyst says, is the major disconnect.

Dissecting the deal, Bernstein Research's Craig Moffett says there are two important takeaways from the Wave transaction: 1) Public cable stocks are below what private equity investors are willing to pay for entire businesses; and 2) Pressures toward industry consolidation are trumped by a public/private market disconnect.

"Soaring programming costs put pressure on smaller operators to sell to large ones. But the big operators like Comcast and Time Warner Cable have indicated that they will not acquire assets at prices above their own valuations," Moffett said. "In a market where private valuations are so much higher than public valuations, industry consolidation is unlikely. A deal like TWC's acquisition of Insight would appear to be the exception, not the rule."

Moffett also warned investors to be careful when comparing small systems being swapped between private equity firms and large publicly traded names - as Wave's network/markets/management are all solid. But, the analyst said,  "the comp set by the Wave sale is nevertheless dramatically higher than public equity valuations."

By contrast, the analyst said, shares of cable's Big 3 - Comcast, TWC, and Cablevision - all trade for values "radically less" than that implied by Wave's EV valuation. As such, Moffett said, a more active private market for cable could be a significant catalyst for cable shares. "Low valuations in the public market are in part a consequence of the lack of a price discovery mechanism in the market," the analyst said. •

Retrans to Grow How High? - Disney Dumps Junk (Ads) - DISH's Covert Channel Swap

Research: Moody's analyst Carl Salas tells SNL Kagan that retransmission revenue will hit $6B by 2020, about 25% of all revenues generated at TV stations. Even more alarming is that retrans revs only accounted for 2% of total TV station revenue in 2005 and 11% this year. --- 4th Estate's new study of 2012 election-year coverage shows that American TV news programs feature up to 7-times more quotes from male professionals than women... even when the topic is a "woman's issue."  Which networks are the biggest offenders? According to the study, MSNBC's 'Hardball' tops the list, quoting men 81% of the time, followed by Fox's 'Special Report' (77%). --- Are you addicted to Facebook? Not like in harmless, stay-connected kinda way, but actually clinically addicted? Answer these 6 questions to find out. --- In related Facebook news, new figures show that 4 out of 5 users have never bought a product or service as a result of the social network's advertising efforts. And, says a new survey, 34% of users say they're spending less time on the site now than they were just 6 months ago. *Gulp!*

Strategy: Disney CEO Bob Iger joined the First Lady Michelle Obama in Washington, D.C. this week to announce that the media giant will no longer air junk-food commercials on its suite of children-centric networks starting 2015. Mrs. Obama cheered the move calling it a "game-changer." Indeed.

Disputes: Reports say DISH covertly moved AMC, IFC and WeTV to a different channel on its line-up after the network began notifying DISH subs that they could lose AMC if the two sides don't reach a new carriage deal by the end of the month. --- DIRECTV subs in Florida and Maine lost access to Diversified Communications stations after the two sides failed to reach a new retransmission agreement. Affected channels are ABC-affiliate WCJB-TV in Gainesville and CBS-affiliate WABI-TV in Bangor.

In Court: TiVo countersued Cisco this week. Reuters has the latest.

Service: Boxee launched an iPhone app dubbed Cloudee that allows users to share videos from the cloud. The company said the app is launching on an invite-only basis for beta testing. --- West Central Wireless will use Alcatel-Lucent's systems to deliver 4G LTE service in rural Texas.

Deals: General Communication and Alaska Communications Systems Group are joining forces to form the Alaska Wireless Network (AWN), an LLC that will hold and operate both companies' wireless facilities. AWN will design and operate a statewide wireless network in Alaska. --- Mobile ad platform Verve is teaming up with data firm PlaceIQ for mobile audience targeting.

Carriage: Fox Sports West extended its carriage agreement with the NHL's Los Angeles Kings that will keep about 75 games per season on the RSN through 2024. In related news, reports say Fox Sports is expected to steal the New Orleans Hornets' TV rights away from Cox, similar to how it took over Padres baseball coverage in San Diego.

Programming: The first season of Investigation Discovery's "Evil, I" premieres Friday, June 15. The program is an eerie look at homicide through the eyes of real killers. Disturbing. --- Bravo's EVP of talent Andy Cohen will host a new show on SiriusXM called "Most Talkative" premiering tomorrow at 10am (ET).

WebTV: MySpace has teamed up with YOBI.tv to launch an "American Idol"-like singing competition program called "Take the Stage."

SkyREPORT: Looks like Boston is the latest municipality to decide where you can/can't install a satellite dish.

Over, Up, & Under: Eurosport said it will deliver live 3D broadcasts of both the French Open and the London 2012 Olympic Games on Eurosport-3D. --- Phillips launched a handful of new smart-TV apps offering, among other content, up to 12 live streams of the Olympics and extensive coverage of FIFA Euro 2012. --- Globecast inked a deal with Phoenix Chinese News & Entertainment to deliver the international broadcaster's InfoNews channel to Europe.

People: New FCC Commissioner Jessica Rosenworcel named two staffers this week: Valery Galasso as confidential assistant and special advisor, and Priscilla Argeris as legal advisor. --- Barry Diller donated a cool $30M to the non-profit Motion Picture & Television Fund. "Happy to do it," said he. Good work.

FYI: The digitally-restored Beatles film 'Yellow Submarine' we've mentioned a couple times is now available on iTunes (which includes some cool bonus material).

--- Catch today's media market news in The Evening BRIDGE. •