The Justice Department and Federal Trade Commission are proposing tightening their merger review guidelines, citing what Attorney General Merrick Garland calls “unchecked consolidation” that “threatens the free and fair markets upon which our economy is based.”

Garland said the guidelines reflect modern market realities. One of those is the rise of the biggest of big tech, Facebook in particular. The Justice Department and FTC — under both Republican and Democratic administrations — as well as Congress have looked at Facebook with concern over efforts to buy up potential competitors before they get big enough to trigger serious merger reviews. For example, one of the new guidelines says that mergers “should not eliminate a potential entrant in a concentrated market.”

Garland said the guidelines reflect modern market realities. One of those is the rise of the biggest of Big Tech — Facebook in particular, which Justice and the FTC have targeted in both Republican and Democratic administrations — and Congress have been looking at with a concern over efforts to buy up potential competitors before they get big enough to trigger serious merger reviews. For example, one of the new guidelines says that mergers "should not eliminate a potential entrant in a concentrated market."

The FTC under chair Lina Khan had signaled it would be looking hard at big tech companies and whether they got that big via buying up to monopoly. The guidelines would put that in writing as policy going forward.

Justice and FTC divvy up merger reviews for antitrust issues, with Justice generally taking the lead on communications mergers. The Federal Communications Commission merger-review process also includes competition issues, but extends to a review of whether a merger is otherwise in the public interest.

Also Read: DOJ Investigating Search, Social, Online Sales Giants

The guidelines were last updated in 2020 during the Trump administration, but Democrats argued they kept a thumb on the scale for mergers, including by, for one, failing to identify merger characteristics that are most likely to be problematic. That is clearly not the case with the draft guidlines just proposed under the Biden Administration.

The new guidelines are in draft form, so they’ll still need to be finalized, but they will come after public comment on how the guidelines should be revised that included feedback from over 5,000 parties, the DOJ said.

The new guidelines are:

1. “Mergers should not significantly increase concentration in highly concentrated markets;
2. “Mergers should not eliminate substantial competition between firms;
3. “Mergers should not increase the risk of coordination;
4. “Mergers should not eliminate a potential entrant in a concentrated market;
5. “Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete;
6. “Vertical mergers should not create market structures that foreclose competition;
7. “Mergers should not entrench or extend a dominant position;
8. “Mergers should not further a trend toward concentration;
9. “When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series;
10. “When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform;
11. “When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers;
12. “When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition“ and “mergers should not otherwise substantially lessen competition or tend to create a monopoly.”

Those 5,000 parties, and anyone else who wants to weigh in, will now have an additional 60 days to comment on the draft guidelines, with a deadline of September 18.

With the Federal Communications Commission still vetting their proposed merger after more than half a year, Standard General and Tegna have launched sgandtegna.com, a website to promote what they see as the public-interest benefits of the deal.

The site is a way for the merger partners to consolidate various letters to the FCC and statements of support for the transaction in one place, and combine that with their pitch that the combo will boost local journalism and minority ownership of the media, both key FCC public-interest goals.

The website also puts Standard General’s recent commitments to the FCC related to retransmission consent and newsroom staffing on public display.

Also: Standard General, Tegna Say Deal Opposition is Legally Irrelevant

The FCC is currently seeking comment on those commitments, which include agreeing not to apply higher retrans rates to Tegna stations due to so-called after-acquired clauses that could otherwise raise Tegna retrans rates to those of Standard General stations and agreeing, as MVPDs had called for, not to enter into joint sales agreements (JSAs), shared services agreements (SSAs) or local marketing agreements (LMAs) between Tegna and Cox Media Group (CMG) stations. (CMG parent Apollo Global Management is providing funding for the proposed merger and getting stations in a side deal.)

Standard General agreed to acquire Tegna in an $8.6 billion deal that includes the assumption of $3.2 billion in debt. Apollo Global Management (AGM) is providing some of the funding for the deal. AGM controls CMG, which will own some of the Tegna stations if the deal is approved.

Petitions to deny were filed by The NewsGuild-CWA, the National Association of Broadcast Employees and Technicians (NABET)-CWA and Graham Media Holdings. ▪️

The Federal Communications Commission is getting a full-court press from both friends and foes of the merger of broadcast groups Standard General and Tegna, which Democrats could block even with a politically divided 2-2 regulator.

The political tie-up has forced the FCC to avoid most controversial calls — like reforming the Universal Service Fund, reinstating network neutrality rules or re-regulating broadcasters — all of which could be on the docket with a Democratic majority. Proposed mergers, though, can at least be thwarted without a majority.

Tegna, which owns 64 TV stations in 51 U.S. markets, agreed to be acquired by Standard General back in February for $8.6 billion including debt. Tegna also owns multicast networks True Crime Network, Twist and Quest, as well as advanced-advertising company Premion.

The FCC has sought more information on the proposed merger's impact on jobs and retransmission-consent negotiations, the latter a big issue with the cable operators on the other side of the table.

In fact, to help Standard General and Tegna respond to its second request for  information, the FCC on Wednesday (Oct. 12) posted instructions in the deal docket on "Instructions for Electronic Production of Documents and Electronically stored Information, saying that "[i]n many cases, it is useful for the party producing the documents, its vendor, and the FCC staff to review the technical details of the production prior to submitting the response."

When the FCC is done vetting that input, and public comments, it would only take two Democrats in opposition — chairwoman Jessica Rosenworcel and Commissioner Geoffrey Starks — to block the deal, confirmed a former high-level FCC official. The Democrats on the commission are being pushed by unions and cautioned by some top Democrats in Congress, the official said.

If it were Republican commissioners who opposed the deal, and Democrats who supported it, the Democratic chairwoman could allow the Media Bureau to approve it, though deal opponents would almost certainly seek full-commission review.

The more likely scenario if the deal were deadlocked, though, is that Democrats would be the ones in opposition.

But while Democrats often cite consolidation ias a reason to have issues about a TV station group merger, Standard General has pointed out that Tegna will actually be smaller after the deal, creating what it called the opposite of consolidation. 

There are certainly high-powered Democrats who are highly skeptical of the deal.

Congressional Concerns

Two of the top Democrats in Congress wrote the FCC late last week to express their strong concerns.

According to a copy of a letter provided to Broadcasting+Cable dated October 6, House Speaker Nancy Pelosi (D-Calif.) and Senate Commerce Committee chairman Frank Pallone Jr. (D-N.J.) asked Rosenworcel to “fully examine” the deal and the concerns raised by public comments, which they say are shared by “many of our colleagues in Congress.”

According to the pair, those concerns include that the deal would restrict access to local news coverage, cut jobs and raise prices for consumers via increased retransmission consent fees to cable operators and other multichannel video programming distributors MVPDs.

Deb McDermott, CEO of Standard General’s Standard Media Group, has written to Tegna newsroom personnel to tell them of the company's commitment to news and news jobs.

Standard General executives have also pointed out that the “complicated” deal structure some have criticized would result in a boost in women and minority ownership of media, an FCC public interest goal. 

The resulting broadcast group would be run by a woman, McDermott, working for Standard General managing partner Soo Kim, an Asian-American. In other words, Standard General told the FCC, the deal would create “the largest minority-owned and female-led broadcast station group in U.S. history.”

Given that diversity argument for the deal, which has support including from Richard Rose, president of the Atlanta branch of the NAACP, the FCC could approve the deal with merger conditions that address sticking points like retransmission consent.

NCTA–The Internet & Television Association has told the FCC that if it does approve the deal, it needs to adopt binding conditions that make sure that the newly companioned company does not leverage that new muscle to engage in impermissible joint retrans negotiations.

‘Shot Clock’ Winds Down

The FCC is currently on day 173 of its informal 180-day informal shot clock on completing its review of the deal.

Standard General pointed out that while its deal requires no waivers or station divestitures to comply with FCC rules, the agency has, indeed, failed to make a decision in almost nine months. Other deals — including Gray Television’s acquisition of Meredith and E.W. Scripps’s purchase of Ion Media stations, which did require spinoffs to stay within the rules — were approved in under three months and under six months, respectively. 

“[T]he time has come to approve the transaction and unleash an almost 300% increase in the number of minority-owned TV stations in the U.S., bringing badly-needed diversity to the nation’s broadcast station ownership,” Tegna said. 

"Deb McDermott and I have a proven track record of enhancing stations’ service to their local communities," said Soo Kim, Standard General founding partner. "As a woman and a minority, respectively, we may well have had to work twice as hard as most to get to where we are in the media industry. We will bring decades of experience and perspectives to the ownership and leadership of TEGNA, an important media company." ■

Opponents of the $8.6 billion Standard General-Tegna deal met with top FCC officials this week to talk about the former’s issues with the deal — particularly the documents those opponents say the merging parties should be producing — and the regulator apparently asked for the meeting.

There was some disagreement over who sought the meeting, with some inside-the Beltway deal-watchers saying the Federal Communications Commission sought out the unions, and others that the unions proposed the meeting to the FCC. 

When asked, meeting participant Andrew Schwartzman confirmed the FCC had sought the meeting.

The opponents also talked about why they had standing before the FCC to participate in their challenge to the deal.

According to an FCC document, Schwartzman, counsel for The NewsGuild-CWA and the National Association of Broadcast Employees and Technicians (TNG-CWA/NABET-CWA) and Jon Schleuss, president of The NewsGuild-CWA met with Holly Sauer, chief of the Media Bureau, which is vetting the deal, and David Strickland, media legal advisor to FCC Chairwoman Jessica Rosenworcel.

Also: Standard General Says FCC Comment Extension Could Cost Millions

They told the FCC that it should make the companies fork over their requested case documents. They said the commission has been too lax in “assessing applicants’ [Standard General and Tegna] assertion that various case documents are not 'germane' and thus need not be submitted.”

Also up for discussion was Tegna and Standard General's challenge of TNG-CWA/NABET-CWA standing to oppose the deal, standing the unions argue they have already established, both as organizations and as concerned citizens/viewers.

Also: Groups Say Tegna Deal Will 'Jack Up' Cable Prices

As to Standard General’s and Tegna’s arguments that pay TV subs fall into the “private contractual harms” category that the FCC has not previously found to raise public interest harms, Schwartzman and Schleuss said increased prices, which they argue will be a result of the deal, are a “paradigmatic” consumer-welfare harm.

Last month, the FCC gave the key communications unions and advocacy groups a two-week extension on the Aug. 1 deadline for comment on the proposed merge. ■

Some powerful unions are teaming up to try and block investment firm Standard General’s purchase of Tegna, with the financial help of Apollo Global Management. 

The NewsGuild-CWA and and the National Association of Broadcast Employees and Technicians (NABET)-CWA filed a petition to dismiss or deny the deal with the Federal Communications Commission on Wednesday (June 22), the deadline for such filings.

They say the deal, which was approved by Tegna shareholders in May, and interrelated transactions — what they labeled an “unprecedented array of sequenced transactions and swaps” — are actually an attempt to “game the Commission’s ownership and retransmission consent rules in ways that contravene the Commission’s public interest standard.”

Also: Standard Media CEO Deb McDermott Tells Tegna Staff News Jobs Won’t Be Cut

Tegna and Apollo have argued that the deal, valued at about $8.6 billion, is in the public interest and will allow for improved local TV-station service, including by boosting local news, creating "the country’s largest minority-owned and female-led TV broadcasting company in U.S. history."

But the unions counter that those assertions of public interest hardly outweigh the deal's downsides, which they say are “significant losses to ownership diversity, to the health and capacity of local journalism and to the cost of pay TV services that would result from grant of the applications.”

After concerns about retrans were raised, the FCC earlier this month issued a request for more information about the deal, including its “anticipated retransmission negotiating strategy post-transaction.”

Also: NewsGuild Calls On Biden to Help Block Tegna Deal

The FCC also asked about any potential layoffs and whether the combined company — or Apollo, which is getting some of the stations in a spinoff side deal — are striking any sharing arrangements or agreements “related to programming, operations or sale of advertising," particularly in the same market. Those are the kinds of deals some critics see as a means to dodge local ownership limits.

In its response to the FCC, Standard General said that the deal would not result in Apollo having any influence or control over the merged companies operations, including its TV stations' retrans consent negotiations and, with one short-term exception, the merged company "will not enter into any Sharing Agreements or other agreements related to programming, operations, or sale of advertising with each other for any station." 

"Standard General has a demonstrable historical commitment to local news operations and pursued this transaction because it has a vision for growing TEGNA’s presence as a leading local broadcast television company employing state-of-the-art technology to provide trusted local news coverage and programming targeted to local audience," said the company in a statement. "Standard General has always placed a high value on local journalism and has no intention, and has not had any intention, of reducing news or news staff at TEGNA stations."

Tegna owns 64 television stations in 51 U.S. markets. It also owns multicast networks True Crime Network, Twist and Quest and advanced-advertising company Premion. ■

Some Democratic senators are backing a bill that would severely limit the ability of large companies to merge, including by disallowing any deals valued at over $5 billion.

That would, had it been in effect at the time, allow the Department of Justice or Federal Trade Commission to have immediately blocked the mergers of Time and Warner, Viacom and CBS, Comcast and AT&T, Comcast and NBCUniversal, AT&T and Time Warner, Charter Communications and Time Warner Cable, The Walt Disney Co. and 21st Century Fox, AT&T and DirecTV, Discovery and WarnerMedia, and Facebook and WhatsApp, among many others.

The Prohibiting Anticompetitive Mergers Act would also allow them to retroactively block “certain mergers” that had led to greater than a 50% market share.

Washington has been looking at unwinding Big Tech mergers, which many Democrats see as companies buying their way to monopoly by purchasing competitors before they get big enough to trigger serious antitrust scrutiny.

Also: Klobuchar Introducing Big Tech Antitrust Bill

The Computer and Communications Industry Association, whose members include a lot of those big Big Tech players, was not pleased with the latest salvo from Washington.

“This preemptive ban on mergers over an arbitrary size would harm both competition and consumers,” CCIA president Matt Schruers said. “Instead of enforcers continuing to evaluate transactions based upon whether they would substantially lessen competition, the bill would arbitrarily prohibit transactions that can bring significant benefits to consumers and the economy. This approach is ill-advised as it would eliminate judicial checks and balances that courts provide to ensure the merger review process remains apolitical.”

There is actually pretty much of a laundry list of things the new bill would do, including:

• 1.) “Allowing the agencies to reject mergers in the first instance without court orders;
•  2.) “Requiring the agencies to reject certain mergers, including prohibited mergers; 
• 3.) “Prohibiting firms with a history of corporate crime or antitrust violations in the last 10 years from acquiring other companies; 
• 4.) “Prohibiting the agencies from negotiating remedies with the merging parties; 
• 5.) “Directing the agencies to scrutinize the labor impacts of each deal and reject mergers harmful to workers ;
• 6.) “Prohibiting private-equity “roll up” strategies that quickly consolidate industries 
• 7.) “Giving a greater role to other relevant agencies and state attorneys general; 
• 8.) “Requiring courts to defer to certain agency determinations; 
• 9.) “Stripping merger litigation from the appellate jurisdiction of the Supreme Court;
• 10.)  “Establish procedures for the antitrust agencies to conduct retrospective reviews and break up harmful deals that have destroyed competition.”

The bill is spearheaded by Sen. Elizabeth Warren (D-Mass.) and a House version by Rep. Mondaire Jones (D-N.Y.). Co-sponsors include Sens. Cory Booker (D-N.J.), Bernie Sanders (I-Vt.), Tammy Baldwin (D-Minn.), Brian Schatz (D-Hawaii), Sheldon Whitehouse (D-R.I.), Richard Blumenthal (D-Conn.), Jeff Merkley (D-Ore.), and Edward J Markey (D-Mass.), and in the House by Cori Bush (D-Mo.), Mark Pocan (D-Wis.), Alexandria Ocasio-Cortez (D-N.Y.), Katie Porter (D-Calif.), Jesús “Chuy” García (D-Ill.), Andy Levin (D-Mich.), Adriano Espaillat (D-N.Y.), Ayanna Pressley (D-Mass.), Rashida Tlaib (D-Mich.), Mark Takano (D-Calif.) and Eleanor Holmes Norton (D-D.C.).

“For the last five decades, big companies have had almost free reign over our economy, squashing competitors, growing bigger and bigger, and abusing their market power to price gouge consumers and crush workers and small businesses,” Warren said. “This unconstitutional behavior has to stop.” ■

The Biden administration is looking beyond antitrust theories for input on the “first-hand impacts” of media and tech mergers to help guide its planned rethink of merger enforcement.

The Justice Department and Federal Trade Commission, which together divvy up antitrust reviews, will co-host "listening forums," seeking input beyond antitrust experts to consumers, workers, entrepreneurs and others. The forums will be headed by Justice antitrust chief Jonathan Kanter and FTC chairwoman Lina Khan, both of whom are big, Big Tech critics.

Both agencies have sought comment on their enforcement guidelines, which they want to strengthen against illegal mergers, saying that recent evidence shows that "many industries" are more concentrated and less competitive.

Also: Sen. Amy Klobuchar Introducing Big Tech Antitrust Bill

Big Tech deals have been of particular interest in Washington as both the FTC and Congress have been trying to figure out whether the biggest of Big Tech firms got that way by buying potential competitors before they get big enough to trigger deeper antitrust reviews.

Also: FTC, DOJ Suspend Early Merger Review Determinations

The first two forums will be on the food, agriculture and health care sectors, with the April 27 forum on media and entertainment mergers and the May 12 session on Big Tech combinations. ■ 

The Biden administration signaled Tuesday (Jan. 18) that it would be updating and strengthening merger guidelines in the face of a surge of consolidation it argues has reduced competition and consumer choice.

That came in an announced “public inquiry” they said was expected to result in “strengthening enforcement against illegal mergers,” and that could potentially create new rules targeting digital markets and their “unique characteristics.”

While both agencies and Congress have been heavily focused on Big Tech and what is seen as its practice of buying up small competitors before they become large enough to trigger antitrust reviews, the Federal Trade Commission said that many industries all across the economy have become more concentrated and less competitive, “imperiling choice and economic gains.”

The agencies said a merger surge would only exacerbate the “problems” they see with consolidation.

They are seeking input — with a 60-day comment window — but not on whether to take action, but instead on what actions to take to “modernize” the guidelines and “better detect and prevent” anti-competitive deals in “modern” markets.

The FTC and the Justice Department outlined some key areas for comment from stakeholders:

1. “Purpose and scope of merger review: The agencies seek information on whether the guidelines explain and implement the statutory ban on transactions that ‘may’ substantially lessen competition or tend to create a monopoly, and what harms are contemplated by those standards. The agencies further seek input on whether distinctions between horizontal and vertical transactions reflected in the guidelines should be revisited in light of trends in the modern economy.

2. “Presumptions that certain transactions are anti-competitive: The guidelines identify certain market circumstances that justify a presumption of competitive harm based on market concentration. The agencies seek information on whether concentration thresholds should be adjusted to improve the efficiency and effectiveness of enforcement, whether alternative metrics or qualitative factors should also trigger presumptions of competitive harm [that goes directly to the issue of buying up to monopoly], and evidence regarding the accuracy of such presumptions.

3. “Use of market definition in analyzing competitive effects: The agencies seek input on potential updates to the guidelines’ market definition analysis to better account for non-price competition. They also seek to input on when direct evidence of a transaction’s likely competitive effects, such as evidence of head-to-head competition, may eliminate the need for a separate market definition exercise.

4. “Threats to potential and nascent competition: The agencies seek input on potential updates to the guidelines’ discussion of potential and nascent competitors, which may be key sources of innovation and competition.

5. “Impact of monopsony power, including in labor markets: The agencies seek input on how to address the issue of buyer power in more detail in the guidelines. Labor markets are a key example of buyer power, and the agencies seek information regarding how the guidelines should analyze labor market effects of mergers.

6. “Unique characteristics of digital markets: The agencies seek information on how to account for key areas of the modern economy like digital markets in the guidelines, which often have characteristics like zero-price products, multisided markets and data aggregation that the current guidelines do not address in detail.”

Sen. Mark Warner (D-Va.), co-sponsor of the Competition and Antitrust Law Enforcement Act, welcomed the decision.

"As a former technology entrepreneur, I know the incredible possibilities that can be achieved when companies bring together their resources and expertise in a merger," Warner said. "However, over the past few years, with the increasing concentration of power in the hands of a small group of companies, acquisition has become the only exit strategy for most startups, as the built-in advantages are too great to overcome. I look forward to working with the DOJ and FTC to ensure that these new merger guidelines strike the right balance between fostering innovation and preventing harmful consolidation.” ■

The Federal Communications Commission on Monday (Nov. 22) approved Verizon Communications’s proposed $6.9 billion purchase of wireless service reseller TracFone Wireless.

TracFone is owned by Mexican telecom company America Movil.

“After rigorous review, the commission found that the transaction, as modified by Verizon’s enforceable commitments, will make Verizon and Tracfone stronger providers of prepaid and Lifeline services,” the FCC said.

Public interest groups, with the backing of Democratic legislators, had agreed to drop their challenge to the deal last August after Verizon agreed to a host of conditions that the FCC has now baked into its approval, plus ones of its own including strong enforcement (see below).

Some top legislators, including Sens. Richard Blumenthal (D-Conn.) and Ed Markey (D-Mass.), had told the FCC that as important as the conditions were, they had to be made “legally binding, vigilantly monitored, and vigorously enforced to ensure the company makes good on these promises.”

“Verizon welcomes the FCC’s approval today of our TracFone acquisition,” senior VP and deputy general counsel of public policy and government affairs Kathy Grillo said. “The deal will provide customers with the best of both worlds: more choices, better services and new features thanks to Verizon’s investment and innovation. Customers will benefit with enhancements in devices, network performance and innovative products and services — as well as a continued commitment to Lifeline. … We will work hard to serve TracFone’s current customers and look forward to serving new ones in this dynamic and fast-growing marketplace.”

According to the FCC, Verizon must:

· “Offer TracFone’s Lifeline-supported services over the same service areas for at least seven years;

· “Offer a free, compatible device or SIM in certain circumstances where Lifeline customers are being required to transition to Verizon’s network;

· “Continue to offer and advertise existing Lifeline plans, with no added co-pays to TracFone’s existing Lifeline plans offered at no cost to prepaid customers for at least three years;

· “Make available to existing and new Lifeline prepaid customers a 5G plan and offer a range of cost-effective 5G devices to existing and new Lifeline customers;

· “Maintain a specified level of marketing and advertising expenditures for Lifeline;

· “Establish and maintain a dedicated website with information about the Lifeline program and a dedicated customer service line for Lifeline customers;

· “Maintain TracFone’s existing MVNO agreements to serve customers outside Verizon’s network coverage (including Puerto Rico, and maintain existing TracFone rate plans for new and existing customers for three years;

· “Maintain an exclusive, toll-free customer service line for customer transition;

· “Conduct outreach, advertise, and display all plans on a dedicated website;

· “Notify customers at least twice before they are transitioned to Verizon’s network;

· “Offer a free, compatible device or SIM in certain circumstances where Lifeline customers are being required to transition to Verizon’s network;

·  “Extend its 60-day unlocking period to all 700 MHz C Block devices purchased from TracFone after closing and activated on the Verizon network;

· “Provide notice to affected TracFone customers of its unlocking policy;

· “Provide MVNOs that have current contracts with Verizon an option to extend, subject to certain limitations specified in the order, their existing MVNO wholesale agreements, on the same terms and conditions, on a month-to-month basis until three years after the transaction closes;

· “Submit publicly available semi-annual reports describing its compliance that includes information regarding Lifeline and non-Lifeline customers for seven years;

· “Pay for and retain both an internal company compliance officer and an independent compliance officer to ensure compliance with these commitments for seven and a half years; and

· “Assume liability for forfeitures, restitution, or other obligations that may be imposed by the commission or the Universal Service Administrative Company (USAC) on TracFone. In addition, Verizon will comply with any agreements with the commission or USAC, including following any compliance plans, or other obligations, agreed to by TracFone, its subsidiaries, or any successors or assigns.”

Public-interest groups have agreed to drop their challenge to Verizon Communication's proposed $6.9 billion purchase of TracFone Wireless after the telecom agreed to a bunch of their conditions.

Those include extending lifeline services for at least three years after the deal closes.

Also Read: Dems Urge FCC to Impose Lifeline Conditions on Verizon-TracFone Deal

Public Knowledge, Access Humboldt, the Benton Institute for Broadband and Society, the California Center for Rural Policy, and Communications Workers of America submitted a letter to the Federal Communications Commission late Wednesday (Aug. 11) withdrawing their objections to the deal contingent on the FCC making Verizon's agreed-upon conditions “enforceable and mandatory.”

The groups reserved the right to remain “active” in relevant state reviews of the deal, saying “but more searching review may be required under the law and policy of each state where the transaction is under review.”

At the same time the groups were pulling their challenge, Verizon sent its own letter to the FCC, noting that "some stakeholders have expressed concern about certain aspects of the transaction, in particular its impact on TracFone’s Lifeline offerings and the introduction of 5G services and devices in the prepaid segment," and saying it had resolved them in discussions with the above parties.

Those conditions are as follows:

1.) "Lifeline Service. Verizon commits to continuing to offer TracFone’s current Lifeline-supported services for a minimum of 3 years following the close of the transaction.

2.) "Lifeline Plans. Verizon will not add new co-pays to TracFone’s existing Lifeline plans offered at no cost to prepaid customers for at least 3 years after the transaction closes, provided that the terms of the Lifeline program do not change in a way that materially increases costs or decreases the subsidy. Nothing in this commitment shall prevent Verizon from pursuing compensation through state or federal device reimbursement programs so long as no unrecovered costs are passed on to Verizon’s Lifeline subscribers.

3.) "Marketing. Verizon commits to maintaining at least the same budget as TracFone did in 2020 for Lifeline Marketing throughout TracFone’s entire service area for at least 3 years following the close of the transaction.

4.) "No Customer Left Behind. Verizon commits to honor the rates, terms and conditions of the MVNO [mobile virtual network operator] agreements that Verizon is assuming from TracFone, and to provide resold voice and data services consistent with the terms of those agreements for at least years after the transaction closes. Verizon also commits to negotiate in good faith with an MNO to extend the terms of TracFone’s existing MVNO agreements for up to 3 years after the transaction closes if doing so would be necessary to avoid service disruption to a significant number of TracFone customers. Nothing in this commitment will require Verizon to modify the rates, terms, or conditions of any agreement it assumes from TracFone.

5.) "5G. Within 6 months after the Transaction closes, Verizon will make available a TracFone service plan to Lifeline prepaid customers that includes 5G service. And Verizon will increase the range of cost-effective 5G devices available to TracFone customers using commercially reasonable subsidy practices supported by regulatory flexibility.

6.) "Enforcement. For a period of 3 years after the close of the transaction, Verizon commits to submitting a quarterly report to the Commission that includes the current number of Lifeline subscribers within the service area Verizon will acquire from TracFone, data regarding its migration of customers from TracFone’s other underlying networks to Verizon’s including the number of devices that have successfully transferred, and the availability of 5G for Lifeline customers, including which geographic service areas have access to Verizon’s 5G network and how many Lifeline customers are receiving 5G service. The report will list all states where TracFone offers a Lifeline-supported service, and will provide a state-by-state breakdown of amounts spent on advertising and other marketing activities associated with Lifeline. Verizon may file proprietary information with the Commission on a confidential basis, making it available only to representatives of parties to the transaction docket who have signed the relevant protective order (either during the pendency of the proceeding or thereafter) provided that Verizon shall also file a public version redacting the proprietary information to be available for review by the public."

"The Public Interest Groups believe that these conditions adequately address their concerns," they said in their letter. 

A group of Democratic senators was taking credit for Verizon's agreement to the conditions, but giving some props to the public interest push as well.

“We are pleased that at our urging, Verizon has made new public commitments regarding Lifeline and budget subscribers as it readies its buy ofTracFone,” said Sens. Richard Blumenthal (D-Conn.), Sheldon Whitehouse (D-R.I.), Dianne Feinstein (D-Calif.), Ron Wyden (D-Ore), and Ed Markey (D-Mass.). “We congratulate the public interest organizations that fought vigorously for these vital protections. These commitments should now be a floor and a starting place for the FCC’s review of the acquisition and negotiations with Verizon. As important as the terms of these commitments are, the conditions must be made legally binding, vigilantly monitored, and vigorously enforced to ensure the company makes good on these promises.”

 The pressure is mounting for programmers, in the wake of the pending $43 billion merger between AT&T’s WarnerMedia and Discovery and Amazon’s $8.45 billion purchase of movie studio MGM, to look for similar hookups. But even as some stocks have risen along with hopes for a stream of big deals, most are telling investors they will resist the temptation.

Warner Bros. Discovery, as the new venture will be named, will be a streaming and linear content powerhouse with more than 30 iconic brands, including CNN, HBO, HGTV and Food Network. While the pairing will likely help drive up affiliate fees for those networks — at least for the short term — the long-term benefit from the deal is expected to be in streaming video. HBO Max, launched about a year ago and with around 44 million subscribers, should get an added boost from Discovery’s own streaming offering, Discovery Plus, which has about 11 million subscribers to its mostly reality-based programming.

Amazon said on May 26 that it would buy MGM in a deal worth $8.45 billion, bringing iconic film content like the James Bond franchise, as well as streaming and linear TV series like The Handmaid’s Tale and Fargo into the online retailer’s fold. Most analysts see the deal as a way for Amazon to quickly bolster its content library, and subsequently its Amazon Prime Video subscriber rolls.   

Heavying Up for the Arms Race

Several analysts have speculated that those deals will beget others. In a research note earlier this month, Wells Fargo media analyst Steven Cahall wrote that he expects ViacomCBS to at least explore monetizing its Paramount and CBS TV studios, as scaled production operations are considered “rare gems” in today’s climate. 

“DTC is a content arms race, and scale is most necessary,” Cahall wrote.

Investors apparently believe the same. Stocks for small and large programmers all have risen in the three weeks after the Warner-Discovery unveiling on May 17. The biggest gains were at Lionsgate Entertainment, the movie studio that also serves as home to premium channel Starz, up about 20%, followed by AMC Networks, up about 16% and ViacomCBS up 10%. The Walt Disney Co., which owns industry-leading streaming service Disney Plus, saw its stock rise about 4% in the weeks after the Warner-Discovery deal. 

Lionsgate Entertainment CEO Jon Feltheimer said during its May 27 conference call with analysts to discuss fiscal Q4 results that the WarnerMedia and Amazon deals are a “resounding affirmation” of the continued value of content, IP and brands, but said he didn’t want his company to get distracted by the “concept of scale.”

Feltheimer was a bit miffed that its Starz premium offering, with about 30 million subscribers, was being called a “niche service” in articles speculating about future M&A.

“We don’t think 30 million subscribers is a niche service,” he said, adding that the goal is to make Starz a market leader in premium content. 

“And that’s how we’ll build our value,” Feltheimer continued. “So obviously, we talked to everyone, we listened to everything, but our main job right now is to create outsized value. And the way we’re going to do that is by keeping our head down, having all of our businesses talk to each other 10 times a day, which is what they do.”

Comcast’s Options    

Comcast, which owns NBCUniversal as well as the largest traditional cable distribution arm in the country, has been under pressure to spin off its content arm to unlock value. While that could still happen, Cahall wrote that Comcast has three choices: selling/merging its studios, getting more aggressive with its Peacock streaming service or doing nothing. In his research note, he said option three would be most likely.

At its annual meeting of shareholders on June 2, Comcast chairman and CEO Brian Roberts said there was no need for a buying spree, adding that the company is “pleased with our talent, our assets, our culture, our resources.”

But Comcast has been no stranger to M&A in the past, and the company was said to be looking at WarnerMedia earlier this year but backed off because of regulatory concerns. While its size may ultimately dictate its options, Roberts said Comcast and AT&T are distinctly different companies with disparate needs. 

“What AT&T does sort of speaks for itself,” Roberts said. 

Amazon is in talks to buy MGM, according to numerous published reports.

Metro Goldwyn Mayer, the 97-year-old studio home to film franchises including James Bond, Rocky, RoboCop, The Pink Panther and Chucky the killer doll, has been on the block since December. Apple and Comcast have already kicked the tires and valued the company at around $6 billion. MGM also owns the Epix premium programmer.

Now, MGM’s majority owner, New York investment firm Anchorage Capital, reportedly wants around $9 billion, and that’s the price Amazon is said to be negotiating around.

Amazon’s ties to an MGM purchase have been rumored for several months, but The Information reported on Monday that Mike Hopkins, senior VP of Amazon Studios and Prime Video, is indeed leading an acquisition discussion. The New York Times and Variety, among several other publications, subsequently confirmed these talks themselves. 

According to The NYT, Michael De Luca, MGM’s chairman, presented the studio’s coming slate to Amazon’s team on Friday.

With AT&T agreeing to divest its WarnerMedia division and have it merge with Discovery Inc., media consolidation is certainly top of mind. Much of the discussion around that deal revolves around the opportunity for WarnerMedia and Discovery to jointly compete with the runaway likes of Disney and Netflix, which have more global scale than anyone right now. 

But with 175 million Amazon Prime members worldwide using Amazon Prime Video, according to a recent company disclosure, Amazon’s scale is pretty impressive, too. 

MGM, which has a library of around 4,000 films, would add heft to Amazon Studios at a time when it’s not only programming the subscription Prime Video service, but also is trying to expand the ad-supported IMDb TV platform. 

MGM’s pending film slate includes Ridley Scott's House of Gucci, starring Lady Gaga and Adam Driver; an untitled ‘70s-era film directed by Paul Thomas Anderson (Boogie Nights) and starring Bradley Cooper; and the Aretha Franklin biopic Respect starring Jennifer Hudson.

Three years after it said it would spend more than $100 billion (including assumed debt) for Time Warner Inc., AT&T is a pure-play phone company again, agreeing to spin off its WarnerMedia business into a separate entity with Discovery Inc., effectively ending its years-long experiment in the TV distribution and content business. 

This is the second spin-off the phone giant has made in about three months. In February, it said it would spin off DirecTV in a separate, publicly traded unit that would include private equity giant TPG, for about $16 billion, or less than half the $49 billion ($66 billion including debt) it paid for the asset in 2015.  

With the Discovery-WarnerMedia deal, AT&T has effectively given up on its media strategy, which a mere three years ago was supposed to be the foundation of the new AT&T. Now, AT&T gets $43 billion for an asset it paid $85 billion ($108.7 billion including assumed debt) for in 2018, and becomes a pure-play phone company again. 

In a research note, Bernstein media analyst Peter Supino said that AT&T management came to the realization that Time Warner executives did when they decided to look for a buyer three years ago: the new content model is tough.

“We think this merger discussion evidences AT&T's concern about the cost to make HBO Max a long-term winner in global streaming,” Supino wrote. “We believe that the capable [Time Warner Inc.] management team was elected to sell the company because it could not solve [Time Warner’s] market share problem as a public company prioritizing profits. In that context, we have thought it almost inconceivable that the phone company would solve that same problem. That the phone company is anxious about its adjusted leverage approaching 3.8x makes it even less likely to lead Warner Media to glory.”

Supino’s Bernstein colleague, media analyst Todd Juenger, wrote in a note to clients that the WarnerMedia-Discovery deal is proof that neither company believed it had the scale to make streaming a success alone. But he had doubts that this transaction will make the combined company big enough. 

“Taking two businesses where the vast majority of the cash flow is derived from linear TV, which is in our opinion a structurally impaired business (with cyclicality as well), does not create a better business,” Juenger wrote. 

Also Read: AT&T: Taking a Mulligan on Media 

In a conference call with analysts about the deal on May 17, AT&T CEO John Stankey talked a lot about 5G and fiber, two things that probably haven’t been top of mind for many investors as the company struggled with DirecTV subscriber losses and concerns over HBO Max’s sluggish customer growth. Now, with the distraction of the media business gone, maybe they can focus on what they appear to be good at -- the phone business. 

AT&T is coming a bit late to that decision. Its chief wireless rival, Verizon Communications, came to that realization a few years ago, after dipping its toes in the content creation and distribution businesses. Earlier this month it cleared the media deck with the sale of its remaining media assets to Apollo Global for about $5 billion. Verizon still has its Fios TV pay TV distribution business, but it's clear the real emphasis there is on broadband.

Now AT&T gets to focus on broadband too. During a conference call with media, Stankey  said the goals for the new AT&T would be “simple and straight-forward”: growing its wireless network to reach 200 million POPs by the end of 2023, and to more than double its fiber footprint to 30 million homes by the end of 2025. That sounds like a phone company talking to me. 

For WarnerMedia, which has been on a bit of a roller coaster ride in the past few years, it gets an owner that actually knows the TV business. In a conference call with analysts, Discovery CEO David Zaslav, who will head the new entity, noted that he’s known a lot of the media unit's employees for 30 years. Zaslav had a long career running NBC Cable before joining Discovery about 15 years ago, and he has managed to grow that company through acquisitions and organically. Now he’s leading it into the next stage.

That’s really important. Whatever your thoughts about WarnerMedia under the watchful eye of AT&T management, it’s pretty obvious that the old structure wasn’t working. Since taking over Time Warner in 2018, WarnerMedia has had three CEOs -- Stankey, who became CEO of AT&T last year; Bob Greenblatt, who was fired after about a year on the job; and Jason Kilar, the Hulu founder who suddenly made himself extremely available in the past few weeks, keynoting the MoffettNathanson Media & Communications Summit conference on May 13  and becoming the subject of a sprawling Wall Street Journal profile on May 14.

According to at least one outlet, in hindsight it appears Kilar was beginning to see the handwriting on the wall, and was trying to put himself and his accomplishments out there just in case he had to make a sudden move. The New York Times reported Monday that Kilar was assembling a legal team to negotiate his exit.  

Kilar was thrust into the role after Greenblatt, who had past successes with Showtime and NBC, was shown the door. About seven months after taking the job, Kilar caused some uproar in the talent ranks when he unveiled a plan to shatter theatrical windows, opening up Warner Bros. Studios’ entire 2021 slate to streaming and theaters simultaneously.  WarnerMedia is going back to the old windows for its 2022 movie lineup. 

On the conference call with media, Zaslav called Kilar “a fantastic talent,” but passed to Stankey on the call when asked about the Hulu founder’s future in the new company.     

Stankey said that Kilar remains the CEO of WarnerMedia, but that Zaslav “has got a lot of decisions to make on personnel and how things are structured moving forward during this transition period, as he works his way through it, I’m sure he’ll be talking with folks about where that’s going.” 

Not exactly a ringing endorsement.

Zaslav said that the new company will have a new name, coming in the next week or so, and that the idea is to fully integrate Discovery and WarnerMedia. Whether that means that the two companies’ respective streaming services will be combined as one, isn’t quite clear. Pricing also is going to be key. Currently, HBO Max is the most expensive DTC streaming service at about $15 per month and Discovery Plus is at about $4.99 ($6.99 for an ad-free version) per month. HBO Max is planning to launch an ad-supported version in June, which some reports say will be priced at about $9.99 monthly. How Zaslav melds and prices those two offerings is still a question, but most analysts believe that a $25 HBO Max/discovery plus service is hopefully not in the cards.

Juenger wrote that if the plan is to not offer the Discovery Plus and HBO Max products separately, then the price of one or both has to come down significantly, with no change in content. That, he said, would most likely lower the value of the companies’ current streaming plans. 

“For this new suite of streaming offerings to be more valuable than the current plans, one would have to believe that by sacrificing ARPU of one or both, there would be enough incremental additional subscribers to more than make up for that,” Juenger wrote. 

That could be hard because while some analysts (including Juenger) have noted how this deal will have a big impact on the linear channels, the real reason behind this is the failure for HBO Max to live up to expectations. While HBO Max has about 44.7 million subscribers, more than half of those are estimated to be linear HBO customers. Discovery, which launched its Discovery Plus streaming service in December, has about 15 million customers. While many of those are getting service for free through a promotion with wireless company Verizon, that is still strong growth with a lineup of reality shows that admittedly don’t have the same cachet as Game of Thrones or Mare of Easttown. Zaslav has said that Discovery makes more money per subscriber from streaming than from linear TV,  and that the average viewer watches Discovery Plus about three hours per day. Kilar said at the MoffettNathanson conference that HBO Max engagement is about two hours per day per active account. 

It’s not like AT&T didn’t have high hopes for content when it bought Time Warner in 2018, saying that it would combine the programmer's iconic HBO premium network and linear channels like TNT, CNN, TBS, Cartoon Network, TCM and others with its state-of-the-art telecom services. Chairman and CEO at the time Randall Stephenson was quick to talk about the 100 million-plus subscribers that AT&T had through its wireless services that would be able to access WarnerMedia content. Three years later, Stephenson retired and  Stankey, who had run WarnerMedia shortly after its purchase by the telephone giant, isn’t talking as much about engagement anymore. 

Also Read: AT&T and TPG: There Is No Why

One lesson phone companies seemingly have to learn year after year after year  is that the TV business is not the phone business. And a climate where Disney Plus, The Walt Disney Co. 's streaming content juggernaut, has more than 100 million subscribers but still took it on the chin for not growing fast enough, just shows that streaming, as it is currently modeled, requires an unprecedented level of scale and engagement. No one has been able to figure it out yet. Now, it’s going to be David Zaslav’s problem to solve.  

This story was updated to correct the pricing of the Discovery Plus streaming service.

After COVID-19 slowed merger and acquisition activity in the media and telecommunication sector during 2019, deals will be driven by a shift to streaming, according to a new report from PwC.

As big entertainment companies followed consumers’ new consumption patterns, the will want to acquire or develop content, particularly as they expand internationally and require more localized content to compete.

The report noted that cloud and app-based services, digital publishers, podcasting and video game publishers have all become more attractive acquisition targets as advertising budgets became focused on digital mediums and consumers turned to at-home.

Also Read: AT&T Sells Crunchyroll to Sony for $1.175 Billion

On the other hand, businesses that rely on in-person audiences or production and traditional advertising could become takeover targets as their need for funding grows.

“While the Media & Telecom sector was able to pivot to a virtual marketplace during COVID with relative ease, there is no doubt that people miss the personal experiences generated through live events, and we anticipate a full recovery post-COVID. We wouldn’t be surprised to see legislation, regulations and depressed valuations assist in this recovery,” said Bart Spiegel, US Media & Telecom Deals leader.

There were 612 announced deals in the media and telecommunication sector worth $99 billion over the past 12 months, according to the PwC report. 

Also Read: Scripps Goes National By Buying Ion for $2.65 Billion

“Broadly speaking, the sector was one of the most resilient ones during the pandemic, with deal activity remaining largely flat when compared to 2019,” PwC said. The year was off to a fast start, but slowed when the pandemic hit.

The pandemic forced companies to reconsider their core strategies. Large companies pushed their digital strategies, including streaming, data driven advertising and building 5G networks. Those companies also divested non-core assets to generate cash.

A new Gray TV-backed study concludes that media consolidation increases news output.

One of the knocks on broadcast mergers is that consolidation in ownership leads to consolidated newsrooms and a reduction in investment in news.

But a study from economist Mark Fratrik of Gray's 93 TV markets found that in markets where stations were permitted to join forces, as was the case with Gray's 2018 purchase of Raycom Stations, their news output increased "far more" than markets without consolidation.

That study buttresses Gray's long-standing arguments that the FCC should deregulate local station ownership limits, including allowing small-market combos. 

The study also follows an op ed for Multichannel News written by FCC Chairman Michael O'Rielly back in July asserting that the FCC's small-market consolidation policies that he supports can lead to greater news coverage and using Gray TV stations as an example.

The study included the following takeaways:

1. "In markets where a consolidation of local broadcast stations occurred, total news output increased at those stations by almost 28%, while in other markets without any consolidation, the total news output grew less than 18% over the same period. 

2. "In small markets (those ranked between 101-210 by population according to Nielsen Media Research) the rate that news output increased with consolidation was more than double that of small markets without any consolidation. 

3. "In very small markets, if Gray TV obtained an additional pre-existing Big Four affiliation, local news output increased nearly 40%. 

4. "Google earns more local advertising revenue than all commercial television stations in the United States combined, and Facebook is getting closer every year.

5. "BIA Kelsey, a leading advertising analyst, now forecasts that 2020 local broadcast advertising nationwide will be down nearly 13% compared to 2018, the last year impacted by political spending."

A federal appeals court has thrown out two of the Charter/Time Warner Cable broadband-related conditions, the ones "prohibiting Charter from charging programming suppliers for access to its broadband subs" — no charging for interconnects — and the one "requiring New Charter to provide steeply discounted broadband service to needy subscribers," with the court saying it essentially had no choice after the FCC failed to defend them. 

Three customers of the combined Charter/Time Warner Cable/Newhouse, represented by the Competitive Enterprise Institute, had filed suit saying the conditions were responsible for their cable bills going up and wanted the conditions set aside due to that "injury."

Because the FCC did not defend the conditions, imposed by the Tom Wheeler FCC, the court vacated both, but made clear that the other conditions — usage-based pricing and buildout conditions— remained in force. The petitioners had challenged them as well. Charter separately is looking to get out from under the usage-based pricing conditions.  

A three judge-panel of the U.S. Court of Appeals for the D.C. Circuit said the FCC appeared to have imposed irrelevant and nongermane conditions, but did not have to get to those issues. 

"We need not resolve these questions, however, for there is a simpler ground of decision," the court said. "The lawfulness of the interconnection and discounted-services conditions are properly before us, yet the FCC declined to defend them on the merits. The agency’s only explanation for doing so was its view that we cannot reach the merits. Having lost on that question, the FCC has no further line of defense. “Because the Commission chose not to argue the merits in the alternative, we have no choice but to vacate the challenged portions of the order.” 

The decision was two to one, with judge David Sentelle dissenting. Sentelle did not weigh in on the merits, but dissented because he thought the court should not be weighing in at all. "[T]here is insufficient evidence to show that the injury to the consumer appellants would be redressed if this court were to order the vacation of the conditions imposed by the government on New Charter," he wrote. "It may be that New Charter would take actions beneficial to the appellants, but it is not the case that this court can redress their injuries."

Free State Foundation president Randolph May focused on the court's opining on non-germane conditions.  

“Aside from the court’s decision regarding specific merger conditions, I was very pleased to see the court affirm what I’ve been preaching for two decades — the so-called ‘voluntary’ conditions that merger proponents offer up in order to get the FCC to act on their pending merger applications are a not-so-subtle form of unseemly regulatory exhortation," he said. "Hopefully, other courts will build on the foundation the opinion has laid for challenging these 'voluntary' commitments often having nothing to do with the specific merger at hand.” 

One reason the FCC did not challenge the petitioners on the conditions is that chairman Ajit Pai has long criticized "regulation by deal condition" and even voted against the Charter/TWC merger not because he opposed the merger, but what he saw as overregulation (or even extortion) by non-merger-specific condition. 

In his statement on the Charter/TWC deal, he said the FCC had “turned the transaction into a vehicle for advancing its ambitious agenda to micromanage the internet economy.”  

In 2017, Pai led the FCC vote to modify the Charter/TWC deal by removing the condition that Charter overbuild a million internet access customers who could already get high-speed access from another provider.

Virtual MVPD service FuboTV agreed to be acquired by tech company FaceBank Group.

Financial terms were not disclosed.

The deal is the latest in a series of acquisitions of streaming services. Pluto TV was acquired last year by Viacom. More recently Xumo agreed to be acquired by Comcast and Fox agreed to buy Tubi.

FaceBank said that after the merger, FuboTV will become a wholly owned subsidiary of FaceBank. The combined company will be called fuboTV Inc.

Fubu TV CEO David Gandler is expected to be the CEO of the combined company.

The companies said the combination creates a leading digital entertainment entity combining fubo’s live streaming with FaceBank’s technology driven intellectual property in sports, movies and live performances. The company plans to continue to expand globally, using FaceBank’s Nexway AG eCommerce platform to accept payments.

“The business combination of FaceBank Group and fuboTV accelerates our ability to build a category defining company and supports our goal to provide consumers with a technology-driven cable TV replacement service for the whole family,” said Gandler. “With our growing businesses in the U.S., and recent beta launches in Canada and Europe, fuboTV is well-positioned to achieve its goal of becoming a world-leading live TV streaming platform for premium sports, news and entertainment content. In the current COVID-19 environment, stay-at-home stocks make perfect sense - we plan to accelerate our timing to uplist to a major exchange as soon as practicable. We look forward to working with John and his team of creative visionaries."

Fubo started as a soccer streaming service and has expanded into other sports and entertainment channels.

Fubo had raised more than $150 million in funding. Investors included 21st Century Fox, AMC Networks, Luminari Capital, Northzone, Sky, Discovery, Waverly Capital, DCM Ventures, i2bf, LionTree Partners, Univision, Edgar Bronfman Jr., Chris Silbermann and the late NBA commissioner David Stern.

FaceBank develops digital likeness assets of celebrities and consumers for used in artificial intelligence, entertainment, personal productivity and social networking.

“As a tech-driven IP company, FaceBank was looking to find the perfect delivery platform for its celebrity and consumer driven content, with a dynamic user interface that could support the global consumers’ rapidly evolving practices of content consumption,” said FaceBank founders John Textor and Alex Bafer. “David and his team have a clear vision of the future and fuboTV’s technology is second to none among the disruptor class of content delivery – a perfect match for FaceBank Group.”

For more stories like this, visit our sister website Next TV. 

Attention parties with merger regulatory reviews pending or proposed. There are some coronavirus-related changes to the process, said the Department of Justice. 

That is a response to the mass telework directive to government agencies. 

“As the Antitrust Division takes steps to protect the health and safety of its work force and the parties that appear before it, these process changes will ensure that the Division can continue to review transactions efficiently and effectively,” said Assistant Attorney General Makan Delrahim in a statement. 

He said the antitrust division remains "open for business," he said, and ready to work with the business community on vetting mergers. 

The chief changes are: 

1. "For mergers currently pending or that may be proposed, the Antitrust Division is requesting from merging parties an additional 30 days to timing agreements to complete its review of transactions after the parties have complied with document requests. 

2. "If circumstances require, the Division may revisit its timing agreements with merging parties in light of further developments. 

3. "The Antitrust Division will allow electronic filing of Hart-Scott-Rodino submissions. 

4. "The Antitrust Division will conduct all meetings by phone or video conference (where possible), absent extenuating circumstances. 

5. "All scheduled depositions temporarily will be postponed and will be rescheduled using secure videoconferencing capabilities." 

The trial in the legal challenge by some state attorneys general to the T-Mobile-Sprint merger began Monday (Dec. 9) in a New York district court.

T-Mobile and Sprint have pledged not to close their deal until the state AG suit is resolved. The deal has been approved by the FCC and passed antitrust muster--with conditions--at the Justice Department.

Related: More States OK with T-Mobile-Sprint

“The megamerger of T-Mobile and Sprint would reduce competition in the mobile marketplace and be bad for consumers, bad for workers, and bad for innovation," said New York attorney general Letitia James, who along with California AG Zavier Becerra, were the lead states on the suit. "We simply must protect consumers from unchecked corporate dominance and make sure competition in the marketplace yields better outcomes for cell phone customers and workers alike.

Becerra said the merger would hurt consumers and said he was confident they had the law on their side.

Related: Civil Rights Groups Strike Deal with T-Mobile-Sprint

The government says that the combo creates a stronger number three competitor to Verizon and AT&T given that the DOJ settlement requires it to  spinoff pre-paid wireless operator Boost Mobile to Dish, which they say will morph into a fourth facilities-based carrier. The AGs argue that it will instead reduce competition with no guarantee that Sprint will ever morph into a new "uncarrier."

Joining California and New York in the suit are Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Oregon, Pennsylvania, Virginia, Wisconsin, and the District of Columbia.

A number of other states including Colorado, Florida, Kansas, Louisiana, Nebraska, Ohio, Oklahoma, Nevada, South Dakota and Texas have joined DOJ's settlement approving the deal with conditions. 

CBS and Viacom, less than a month away from completing their long-awaited re-merger, have given analysts and investors plenty to worry about, even as they tout their deal as creating a $28 billion media power poised to ride the wave of streaming video.

ViacomCBS will possess a massive library (140,000 TV episodes, 3,600 movie titles); strong direct-to-consumer businesses in CBS All Access, Showtime and Pluto TV; film production; and broadcasting, after closing sometime by early December.

Analysts following both companies have been skeptical of the combination, and over the past few weeks the basis for those fears has been evident. Since announcing the intent to merge on Aug. 13, Viacom stock is down 23.1% and CBS shares have fallen 22.7%.

Worries, especially on the CBS side, surfaced in late October, after the broadcaster filed its S-4 registration statement and revealed financial estimates for the combined company that in some cases were well below analysts’ projections. That resulted in several downgrades for the stock, and a nearly 4% decline in both Viacom and CBS shares between Oct. 16 and 18.

Reaction from analysts about the S-4 ranged from the outraged, with MoffettNathanson media analyst Michael Nathanson calling it an “abject disaster;” to cautious, with Bank of America Merrill Lynch’s Jessica Reif Ehrlich focusing on revenue growth. Ehrlich said in a research note that while content investment was heavier than expected, “we believe healthy top-line trends remain visible.”

Revenue Skeptical

Sanford Bernstein media analyst Todd Juenger, a longtime critic of the Viacom-CBS merger, disagreed with CBS management’s focus on revenue growth, the idea being as content costs fell and revenue grew over time, cash flow growth would rise. He believes the company will need to continually invest in content just to compete.

“We think the competitive environment is only going to get tougher, not easier,” Juenger wrote at the time.

CBS didn’t do much to alleviate those fears when it reported Q3 results on Nov. 12. Revenue was up 1% to $3.3 billion, and cash flow was $27 million in the period (down from $137 million in the prior year), mainly due to increased content investment.

That spending continues. CBS confirmed reports that it purchased rights for soccer’s UEFA Champions League, along with Univision Communications on the Spanish-language side, beginning in 2021. Terms of the deal were not disclosed, but reports put the price tag of the rights at around $150 million per year. According to CBS, it will get the rights to air about 400 Champions League matches, most of which will air live on the CBS All Access streaming service.

CBS acting CEO Joe Ianniello said on an earnings conference call that the Champions League pact was in line with the strategy to buy and create compelling content, though Juenger wondered why Fox, a major player in live sports rights, decided to pass this time out. Either way, CBS appears to be doubling down on its programming commitment.

Unimpressed by Spending

That is usually good news, as most streaming services talk constantly about their robust original programming budgets. The news was not so good for CBS, though. Nathanson noted that, given the trading multiples of the stocks (CBS at 7.5 times 2020 cash flow, Viacom at 5.8 times), “the market has voted that there is no end in sight to the investment spending at CBS.”

Nathanson again pointed to the S-4, which he said hasn’t done much to change the “bear narrative that margins and free cash flow are in structural decline.” Still, he was hopeful that once the merger is finished, investors will get more clarity and action around several questions, including if synergies will increase, if content spending will be scaled back, if non-core assets might be sold or if stock might be bought back.

“Big picture, if these elevated spending levels are not generating the necessary returns as CBS and Showtime margins are eroding, when will the decision be made to shift the strategy back to a full arms dealer of content to third parties?” Nathanson wrote.

Viacom’s fiscal Q4 results, released on Nov. 14, didn’t help the situation. Full-year free cash flow missed its estimates by almost $100 million, at $1.75 billion versus the earlier estimate of $1.83 billion. Revenue also was down 2% to $12.8 billion, while adjusted OIBDA rose 2% to $2.9 billion.

“If Viacom can't predict one quarter in FY19, why would anyone believe their S-4 predictions for FY20 and beyond?” Juenger wrote.

What is the status of the FCC's T-Mobile-Sprint 180-day merger review shot clock?  

Deal watchers could be forgiven for being confused. According to the FCC website, the clock on the FCC's review continues to run, currently on day 332 of the FCC's merger review, but looks can be deceiving. 

Actually, the review has been completed and the merger approved by a vote of 3-2 Oct. 16. The Republicans voted early and the Democrats eventually weighed in with their dissents. So while Oct. 16 was the official approval, the deal even then already had garnered the three votes it needed to pass.

Related: Petition Filed to Delay T-Mobile-Sprint Decision 

But in regulation, as in sports, it ain't over 'til its over. 

The FCC has yet to release the item, to which the merger review clock is tied. Some redactions were needed (to protect competitively sensitive info, for example) and commissioners are given some time after a vote to craft their official statements. Then the chairman gets some time to craft a response, if he chooses, before the vote is official. 

A source said the item should be released soon, while an FCC official said that when that happens, the clock will be "retroactively stopped to the day the vote was final [Oct. 16]." Which the official said is consistent with past practice.  

The deal, which was filed with regulators almost a year ago, still won't close, even though the Justice Department has already reached an agreement that resolves its antitrust issues with the merger. A bunch of states have challenged the Justice Department's settlement with the companies and T-Mobile has pledged not to close the deal until "six days" after that court case is resolved.  

So, although the FCC has completed its review of the merger, the merger review clock continues to tick on. And, although both the FCC and Justice have said they are OK with the deal closing, it won't be closing anytime soon. The trial in the state challenge does not even begin until Dec. 9.

A decade ago, over-the-top distribution was a start-up’s game, dominated by the Slingboxes and Aereos of the world, not to mention the wave of YouTube multichannel networks like AwesomenessTV.

Heck, it wasn’t that long ago that Roku, which went public as recently as 2017 and will be a billion-dollar revenue company this year, was considered a start-up. In fact, Netflix was once a start-up, too, although it went public in 2002, long before it began streaming video.

These days, of course, OTT video is dominated by Silicon Valley giants, which have—somewhat ironically—put the major media conglomerates and telecoms in the role of insurgents, with Disney, AT&T/WarnerMedia and Comcast/NBCUniversal about to launch new streaming services to try to disrupt the strongholds of Netflix, Amazon Prime Video and YouTube. Even Apple is playing the role of disruptor with Apple TV+.

Indeed, streaming is now a big company's game, with the next wave of disruption driven by some of the biggest corporations in the world. But there are a few scrappy streaming start-ups still out there, waiting to get bought.

Of course, they very infrequently say outright they want to get purchased. But it’s so obviously the plan! With that in mind, here are five notable independent OTT companies, which seem to be seeking a lot of attention these days. Note that we’re focusing on streaming start-ups here, and not ad-tech companies.

TUBI TV

Viacom had M&A talks with San Francisco-based Tubi TV in January, just before it announced its $340 million purchase of another AVOD platform, Pluto TV.

Speaking with MCN just after that Pluto TV deal was announced, Farhad Massoudi, co-founder and CEO of Tubi TV, said, “I can’t comment on M&A, but we are very confident in our path of staying independent.”

Certainly, the start-up—which was founded in 2011 as an ad tech company called AdRise, and has been privately funded to the tune of $26 million, according to its Crunchbase profile—has done everything it can to keep up its public profile.

Shortly after that conversation, Tubi TV closed on a $25 million loan with Silicon Valley Bank that it said would be used on a “nine-figure” content acquisition budget in 2019.

Indeed, Tubi TV has stayed steadily in the news, announcing myriad content deals, integrating its app natively into major pay TV platforms including Cox’s licensed version of X1, and expanding into Australia.

XUMO

It was reported back in February that Sinclair was “kicking the tires” on this Irvine, California-based AVOD company, which supplies an app that runs natively on smart TVs manufactured by Panasonic, LG, Sharp and Hisense.

Xumo is actually a joint venture between Panasonic and Viant, a Meredith-owned company that now owns MySpace. Speaking to MCN late last year, CEO Colin Petrie-Norris said his marching orders are to “grow the business rapidly.” The focus recently has been adding niche sports programming channels to its live-streamed, pay TV-like programming grid.

And like Tubi TV, Xumo’s name has been active in the headlines over the last six months, hiring new executives, expanding its channel lineup, and natively embedding its app into Comcast’s X1 and Android TV set-tops.

PHILO

The San Francisco-based virtual MVPD operator launched in 2010 and has been privately funded with $83.2 million through seven rounds, according to the company’s Crunchbase profile. Investors include Discovery Networks, Scripps Ventures, Viacom, A+E Networks, AMC Networks and HBO.

In April, Philo became the latest vMVPD to adjust its business model and raise rates, consolidating its service tiers into one $20-a-month offering with 58 channels, no broadcast networks or sports channels.

Led by CEO Andrew McCollum, who was part of Facebook when it was considered a startup, Philo kept it close to the vest when MCN pinged it about possible M&A opportunities. A company rep sent us the announcement from last year that Philo went live on Amazon Fire TV and Apple TV. She said that was the last time the company talked finances publicly. It was the equivalent of saying, “no comment.”

As far as we can tell, Philo hasn’t released a subscriber figure. But the company does seem to give off a decided “for sale” vibe at industry events.

Speaking at MCN’s OTT Summit conference in Santa Monica, California earlier this month, Mike Keyserling, COO and head of content acquisition for Philo, managed to boast about huge growth without giving away subscriber figures.

“We grew by 30% in the last eight weeks, and we’re really at the most accelerated growth in our company’s history,” Keyserling boasted.

FUBOTV

The New York-based virtual MVPD startup has raised more than $151 million in private funding from investors including Scripps, Sky and AMC.

Slogging it out against huge rivals backed by publicly traded telecom and tech giants, including Sling TV, DirecTV Now, Hulu with Live TV and YouTube TV, in the low-margin vMVPD business, not having to endure quarterly earnings reports has been an advantage for FuboTV early on, CEO David Gandler told MCN in an interview conducted late last year, as the company was expanding operations to Spain.

Like the aforementioned streaming startups, FuboTV has kept its name steadily in the news this year. And it doesn’t want us to call it a pivot away from the vMVPD business, but FuboTV’s latest news all centers around Fubo Sports Network, a soccer and niche-sports themed 24-hour news channel that FuboTV itself has compared to Cheddar, the 24-hour digital channel that was recently purchased by Altice USA for $200 million. The channel is available on FuboTV, but also via the Roku Channel and Samsung smart TVs.

Speaking to Business Insider recently, Gandler admitted it'll be tough for FuboTV to stay independent. "It's tough in a sector that's skewed by M&A to take that off the table,” he said.

CURIOSITYSTREAM

Founded in 2015 by John Hendricks, the former Discovery Channel architect who once pioneered the basic cable universe, nature-documentary-themed SVOD service CuriosityStream has been privately funded with $254.7 million to date.

Announcing a $140 million funding round in February, CEO Clint Stinchcomb said the service reached 1 million paying subscribers at the end of 2018, and now has library content with more than 2,000 titles. By the end of this year, CuriosityStream expected its viewers will be able to choose from more than 3,000 titles including more exclusive originals available in 4K.

Stinchcomb said in May that CuriosityStream expects to have “several million" subscribers by the end of 2019, which would be a substantial increase over the 1 million it finished 2018 with. 

CBS and Viacom executives will have a few months to convince Wall Street their $30 billion merger is all they say it’s cracked up to be, but the muted response from investors could make the job harder.

Shares of CBS and Viacom fell 8.3% and 8.5%, respectively, on Aug. 14, the first full trading day after the companies announced the merger, expected to close by the end of the year. The decline continued on Aug. 15, with each stock down 2.9%. In the two days since the announcement, Viacom and CBS each lost more than 10% of their stock values, resulting in a loss of more than $3 billion in market capitalization.

Even analysts who liked the deal cautioned it could be a hard sell, including MoffettNathanson analyst Michael Nathanson, who said the combined companies could help drive advertising yields and distribution of network assets.

Viacom and CBS were a combined company before, separating in 2005 and reuniting now at the impetus of principal shareholders Sumner and Shari Redstone.

“Judging by the tepid and languid reaction, the new company will have to work extra hard to prove the financial merits of this transaction,” Nathanson wrote in a note to clients.

For many, the question was never about how a CBS pairing would benefit Viacom. There are still skeptics about what upside the transaction brings to CBS.

Viacom’s Streaming Struggles

Viacom has a stable of well-known core pay TV networks — like MTV, VH1, Comedy Central, Paramount TV, BET and Nickelodeon — and the Paramount Pictures movie studio that could be strong additions to CBS’s portfolio. But, despite some recent ratings growth, the networks have struggled in streaming TV.

Aside from the additional content brands, ViacomCBS will have a library of 140,000 TV episodes, 3,600 movie titles and more than 750 current series, either ordered or in production. It will be one of the biggest spenders on content in the business, shelling out more than $13 billion in the last 12 months alone.

Still, ViacomCBS will be dwarfed by The Walt Disney Co. (which paid $71.3 billion to buy Fox assets earlier this year), AT&T (which shelled out $108.7 billion to buy Time Warner Inc. last year) and Comcast (which bought NBCUniversal in 2013).

ViacomCBS will have considerable reach via its OTT products: CBS All Access, Showtime and Pluto TV should span 25 million homes by 2022. That is less than half of the 60 million domestic subscribers Netflix has now, though.

Some analysts believe ViacomCBS will need to be on the hunt for more acquisitions, with companies like Lionsgate Entertainment, AMC Networks, Discovery and Sony Entertainment bandied about as potential targets.

In an interview with CNBC, Viacom CEO Bob Bakish, who will lead ViacomCBS as CEO after the deal closes, did not rule out future acquisitions. “Just as we used M&A as a vehicle to accelerate our strategy at Viacom, we will potentially use M&A as a vehicle to accelerate our new strategy at a combined ViacomCBS,” he said. “But I’m feeling great about the hand I’ve now been dealt.”

Viacom now gets the backing of the No. 1 broadcast network in its next round of carriage negotiations. And its overall streaming assets are strengthened with the additions of CBS All Access and Showtime, with about 4 million paying subscribers each.

CBS acting CEO Joe Ianniello — who will become chairman and CEO of CBS once the merger closes — said on a call with analysts he saw “tremendous” opportunity in squeezing out higher retrans and affiliate fees as a result of the combination. He brought home the concept by revealing that the combined company accounts for 22% of total TV viewership, but just 11% of the revenue.

“There is significant revenue upside that we should be going after,” Ianniello said.

In a research note, Wolfe Research managing director Marci Ryvicker said just closing that gap by 100 basis points could translate into about $680 million of additional revenue.

Divergence on Fees

That’s crucial for Viacom, which has had to scale back on carriage demands as the popularity of its networks have declined, while CBS has managed to keep its retransmission-consent fee growth fairly steady. Viacom said in its last carriage deal with AT&T — parent to DirecTV, DirecTV Now and U-verse TV — that it agreed to a reduction in rates.

Nathanson said CBS retrans fees have grown from $110 million in 2010 to $1.7 billion in 2018, a compound annual growth rate of 40%. In contrast, Viacom’s affiliate fees have risen from $2.6 billion in 2010 to $3.7 billion in 2018, a CAGR of 4%.

“We have long believed that CBS would use their broadcast stick to drive higher Viacom cable affiliate fees,” Nathanson wrote.

Sanford Bernstein media analyst Todd Juenger, though, said the merits of the deal don’t add up. “We can only wonder how history will judge this decision,” he wrote in a research note. “Will it be three years, five years, or longer before the members involved with that decision look back and think, ‘Oh no, what have we done?’ ”

WASHINGTON — The Justice Department, five state attorneys general and T-Mobile-Sprint have reached an agreement on the proposed merger of the No. 3 and 4 wireless carriers, conditioned on, among other things, the spinoff of Boost Mobile and some spectrum assets to Dish Network.

According to the settlement, “T-Mobile and Sprint must divest Sprint’s prepaid business, including Boost Mobile, Virgin Mobile and Sprint prepaid, to Dish Network Corp., a Colorado-based satellite television provider. The proposed settlement also provides for the divestiture of certain spectrum assets to Dish. Additionally, T-Mobile and Sprint must make available to Dish at least 20,000 cell sites and hundreds of retail locations. T-Mobile must also provide Dish with robust access to the T-Mobile network for a period of seven years while Dish builds out its own 5G network.”

“With this merger and accompanying divestiture, we are expanding output significantly by ensuring that large amounts of currently unused or underused spectrum are made available to American consumers in the form of high quality 5G networks,” U.S. Justice Department antitrust chief Makan Delrahim said of the settlement. “Today’s settlement will provide Dish with the assets and transitional services required to become a facilities-based mobile network operator that can provide a full range of mobile wireless services nationwide. … In crafting this remedy, we are also mindful of the significant commitments T-Mobile, Sprint, and Dish have made to the Federal Communications Commission.”

But due to an extant court challenge by other attorneys general, the deal won't close for months, and then only if the AGs don't win, according to a spokesperson from the California Justice Department.

Delrahim has long said he favors spinoffs to bring deals inside the antitrust ropes, rather than behavioral conditions that must be continuously monitored, though there will be some of the latter as well.

The Federal Communications Commission‘s Republican majority has already signaled it can approve a deal with the Boost spinoff and other conditions the companies have volunteered.

The DOJ announced the deal, essentially filing suit and announcing the settlement at the same time, on Friday (July 26) after reports it could come earlier in the week, but had been delayed.

Still to be resolved is a lawsuit involving more than a dozen state attorneys general (including New York and California), who have sued in a U.S. District Court in New York to block the deal (a status conference is set for Aug. 1).

That will push the deal‘s closing into late in the year or early 2020.

According to a copy of the case scheduling order supplied by an official of California's Justice Department, T-Mobile and Sprint submitted a letter to the court saying: “Defendants agree not to consummate or otherwise complete the challenged transaction until 12:01 a.m. PT on the sixth day following entry of a final and appeal-able judgment, and only if the Court enters judgment in favor of Defendants or otherwise permits consummation of the challenged transaction.”

The trial isn't even scheduled to start until Oct. 7, and the states have asked for that date to be pushed back.

New York State Attorney General Letitia James signaled the states in that suit, which also include California, Colorado, Connecticut, the District of Columbia, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, Virginia, and Wisconsin, aren't ready to throw in the legal towel.

“Here in California and across our coalition of states, our concerns with this merger have been, are, and continue to be about the harms posed by over-consolidation and diminished market competition," said California AG Xavier Becerra, who didn't sound like he favored withdrawing the suit, either (California was a lead plaintiff), though he did add "intend" and "prepared" to his assertion they were still headed to court. "A marketplace with fewer active competitors drives up costs, reduces consumer choice and thwarts innovation. We intend to be prepared to go to trial to fight for a fair, competitive, and equitable marketplace for consumers nationwide.” 

"Based on the information available to date, the states continue to have serious concerns with the merger and whether the deal with Dish will create a fourth independent competitor that addresses the loss to competition otherwise caused by this megamerger," James said.

And FCC chairman Ajit Pai must still circulate his order and given August vacations, it will be tough to get a final vote until September. Calling it a ”new deal,” Democratic commissioner Jessica Rosenworcel has already called for the chairman to let the public comment on that ”new deal’ before a vote, which the chairman is highly unlikely to do. 

And even when the FCC does approve, opponents could challenge that decision in the D.C. federal appeals court, asking it to stay the FCC's decision until the state case is resolved.

Pai has said that approving the deal is key to winning the race to 5G. One of the companies’ arguments for letting them get together was that they could do 5G faster than if they were apart.

The Trump administration has made winning that race a national priority.

One deal critic didn't see the deal as creating a wireless competitor — Dish Network — to keep the U.S. market at four major players.

"This deal creates a faux competitor, not a real one, which is why I would bet on the states in their forthcoming court challenge," Benton Foundation senior counselor Andrew Schwartzman said. "Dish is buying Boost, a brand which sells prepaid service to low-end consumers. Dish will start with none of the lucrative postpaid customers, no brand name and no retail network. Even if Dish successfully builds out its own network, that could not happen for several years, during which time the three big wireless companies will be able to lock in their customers and introduce their 5G technologies.”

In other words, rather than having Sprint as a weak fourth competitor, the combined companies will now face an extremely weak fourth competitor.

"One other thing frequently overlooked is that T-Mobile will actually benefit from having Dish as a wholesale customer,” Schwartzman said. “That means that it will be selling otherwise unused capacity for the next several years. Just as airlines are better off filling empty seats with discounted sales, so too, will T-Mobile will be able to operate its network more efficiently as a result."

CBS and Viacom could be headed back to the negotiating table in the next few weeks, after reports surfaced that leadership of both companies had earmarked a mid-June deadline for talks.

According to a report by CNBC’s David Faber, CBS’s board of directors decided to initiate the talks after a regularly scheduled board meeting on May 29 in New York. This would be the third time CBS and Viacom have explored recombining the two companies since they split in 2006.

CBS and Viacom declined to comment.

Sources familiar with both companies would neither confirm nor deny that talks were scheduled, saying only that discussions around a possible recombination have been off and on between the two companies for the past three years.

Earlier attempts to get back together in 2016 and 2018 were thwarted by CBS’s reluctance, seeing little benefit in being paired with Viacom’s cable networks and a low valuation of Viacom’s assets. Primary shareholder National Amusements (NAI), headed by Sumner Redstone and his daughter, Viacom and CBS vice chair Shari Redstone, has tried to combine the companies in the past, only to pull back at the last minute.

CBS has undergone its own turmoil in the past year, with the departure of chairman and CEO Les Moonves in September after a lurid sexual-harassment scandal. While long-time executive Joseph Ianniello has stepped in as interim CEO — he renewed his deal though 2019 and CBS ended its search for a permanent CEO in April — many observers believe that Viacom CEO Bob Bakish, a Shari Redstone favorite, will end up running the combined company.

The media climate has changed dramatically since the last two attempts at a merger, with The Walt Disney Co. buying certain 21st Century Fox programming and production assets for $71.3 billion, and AT&T completing its $107.8 billion purchase of Time Warner Inc. Increased scale appears to be the main driver in the industry as traditional linear programmers fight off growing competition from direct-to-consumer, OTT and SVOD service providers.

Viacom has had a particularly hard go of it, getting dropped by Cable One in 2014 and reportedly offering discounted rates to AT&T in its last carriage negotiation with the DirecTV and DirecTV Now parent. A pairing with CBS, which includes the No. 1 broadcast network in total viewers and premium channel Showtime, would likely mean stiffer fees for distributors.

Viacom has made smaller acquisitions over the past year, including ad-supported streaming video service Pluto TV for $340 million in March and, in July 2018, short-form video studio AwesomenessTV for an estimated $50 million. Recombining with CBS’s broadcast network could possibly give Viacom a stronger streaming presence with the CBS All Access service.

Wolfe Research managing director Marci Ryvicker said in a note to clients that she was more excited than ever of the possibility of a recombination of CBS and Viacom, adding that she believes the official announcement of talks could come in “any day/week/minute” and that “most major obstacles [are] behind both companies.”

Arris CEO Bruce McClelland will transition to chief operating officer of CommScope, as the latter prepares to close on its $7.4 billion acquisition of Arris.

Meanwhile, Morgan Kurk, the current COO of Hickory, N.C.-based CommScope, will shift over to become chief technology officer of the combined company.

Related: Arris Shareholders Sign Off on $7.4B Acquisition by CommScope

CommScope’s leadership announcement didn’t address the fate of Arris’ top technology executives: Charles Cheevers, CTO of customer premises equipment; Tom Cloonan, CTO of network solutions; and Mehmet Yavuz, CTO of the Ruckus Networks division.

“The addition of Arris and Ruckus to form the new CommScope will enhance our technology leadership throughout the network from the core, through the access, to the edge,” Kurk said in a statement. “I look forward to helping unlock this potential by driving tighter integration across the company and leadership through the ecosystem.”

Added Eddie Edwards, CommScope president and CEO, in a statement.

“We continue to make progress to bring CommScope and ARRIS together and ensure we are better positioned to capitalize on emerging trends, including network convergence, fiber and mobility everywhere, 5G, and Internet of Things.”

“Bruce and Morgan will play pivotal roles in leading our combined companies into a successful future,” Edwards added. “I look forward to working with both of them, along with the entire CommScope management team, in the years to come as we drive profitable growth in new and growing markets, provide end-to-end wired and wireless communications infrastructure solutions and deliver enhanced value to our shareholders.”

The deal was announced in October and approved by Arris shareholders late last month. 

Arris investors have approved the $7.4 billion acquisition of the technology company by CommScope.

In a shareholders meeting in London, investors holding 99% of the company’s stock signed on for the deal, which was announced in October.

"This approval marks another important milestone in accelerating our strategy. Together, we believe Arris and CommScope have an unprecedented opportunity to help shape future communication networks and to look to deliver additional value to our shareholders, customers, partners and employees," said Arris CEO Bruce McClelland, in a statement.

Related: Arris’ $7.4B CommScope Buyout Draws Shareholder Lawsuit

The approval followed a lawsuit filed last month in a New York federal court against Arris by shareholder Louise Agnes-Sampson. She claimed Arris didn’t disclose key financial projections needed by investors to effectively vote in the London meeting.

Shortly after the deal was announced, BTIG Research analyst Walter Piecyk said the combined companies could realize $300-$450 million in annual cost synergies.

“Wireless operators are densifying and entering the broadband market and cable operators are likely to build wireless networks,” Piecyk wrote in a note to investors. “CommScope and Arris have complementary products that address these diverse sets of service providers. As an example, Arris has developed CBRS access points that will appeal to wireless and cable operators and CommScope is developing a SAS (Spectrum Access System) that enables the functionality of those access points.”

The House Energy & Commerce Committee will hold a joint subcommittee hearing on the T-Mobile-Sprint merger on Feb. 13.

The Judiciary and Communications Subcommittees will be hearing from T-Mobile CEO John Legere and Sprint executive chair Marcelo Claure, plus some players to be named later.

Legere tweeted about the hearing:

[embed]https://twitter.com/JohnLegere/status/1090036546281979907[/embed]

Related: T-Mobile Says Trump Hotel Stays Were About Proximity

Pallone's office says it will be the first merger hearing before the Energy & Commerce Committee in the past eight years, which means since Democrats lost the majority.

Last week, a quintet of Democratic senators have written the Republican leadership of the Senate Commerce Committee asking them to hold a hearing on the proposed.

The Dems said they would be looking at the deal "from the perspective of what is in the best interest of consumers and hardworking people."

“We applaud bipartisan House lawmakers for holding this rare joint hearing on the consequences of the T-Mobile-Sprint merger," said the 4Competition Coalition. "In the nine months since the proposed transaction was first announced, the evidence submitted in the public record clearly demonstrates that this merger will hurt consumers, competition, and jobs.  We look forward to lawmakers’ examination of these harms during next month’s hearing.”

Arris is being sued by an investor who claims its Dec. 26 proxy statement doesn’t provide enough information about the company’s proposed $7.4 billion buyout by CommScope.

The complaint, obtained by Bloomberg, and filed in the U.S. District Court for the Southern District of New York, was filed by Louise Agnes-Sampson. She claims that with a Feb. 1 shareholders meeting to vote on the proposed deal coming up, “It is therefore imperative that the material information that has been omitted from the proxy is disclosed prior to the shareholder vote so Arris shareholders can properly exercise their corporate suffrage rights.”

Those named in the suit include Arris Chairman Bob Stanzione and CEO Bruce McClelland.

Related: CommScope Buys Arris in $7.4B Deal

“On December 19, 2018, the defendants filed a materially incomplete and misleading proxy with the SEC and disseminated it to Arris’ shareholders,” the suit claims.

The proxy, the suit adds, “fails to provide enough information regarding financial projections for the company. In particular, the proxy fails to disclose: Arris’ projected unlevered free cash flows and its underlying line items; all line items used to calculate Arris’ non-GAAP EBITDA; a reconciliation of all non-GAAP to GAAP metrics; and Arris’ projections for the years 2022 and 2023.

Arris reps haven’t yet responded to MCN’s inquiry for comment. 

With their respective operator client bases consolidating, and each facing expensive transitions to next-generation wireless technology product lines, two struggling telecom vendor giants joined forces last week.

In a deal valued at $7.4 billion, financing included, Hickory, N.C.-based CommScope purchased Suwanee, Ga.-headquartered Arris. The pact combines two vendors of roughly the same girth; each is market-capped around $5 billion. At $31.75 a share, CommScope paid a 14% premium for Arris.

The deal is expected to close in the first half of next year. CommScope will be in charge of the combined company, but Arris CEO Bruce McClelland and his management team, as well as the Suwanee office, will remain in the fold. Private-equity giant The Carlyle Group has invested $1 billion into CommScope to finance the deal in exchange for a 16% stake. It will have two seats on the board when the deal closes.

The combined company should generate estimated annual revenue of around $11.3 billion and EBITDA of around $1.8 billion.

Both CommScope and Arris are selling the deal on the notion that they sell complementary network components for technologies like Citizens Broadband Radio Service (CBRS). Analysts tend to agree, but actual stock buyers remain skittish — evidenced by CommScope’s 20-plus percent slide on Wall Street in the aftermath of the announcement.

Certainly, both companies could use a boost.

Arris spent lots of money over the last six years bulking up in the pay TV set-top business, acquiring Motorola Mobility’s customer premises equipment division (formerly General Instrument) for $2.35 billion. In 2015, it gobbled up No. 2 set-top supplier Pace out of the UK for $2.1 billion. With large operator clients like Comcast looking to phase out of full-service pay TV set-tops, and milk the last life out of those they have in the market, Arris is looking to transition, evidenced by its $800 million purchase of Ruckus Wireless last year. But around 35% of its revenue still comes from the fading set-top business.

Shortly after the deal was announced, Arris reported a 4.5% third-quarter revenue decline to $1.651 billion.

CommScope is looking to transition into 5G connectivity products, as well, but it’s struggling in the here and now of the mature 4G era (although sales were up 2% in the third quarter to $1.15 billion).

BTIG Research analyst Walter Piecyk estimated that the combined companies could realize $300 million to $450 million in annual cost synergies.

Edwards conceded that the North American pay TV set-top business is in decline. “But it is a good cash generator, so that’s something that doesn’t scare us,” he added. “We have managed a lot of businesses for cash in our past.”

REUNITED

It turns out CommScope and Arris have been together before. Here’s a timeline showing how, in a complex series of deals spanning 21 years, CommScope just paid $7.6 billion for assets it had previously been connected to.

1997: Horsham, Pa.-based General Instrument (GI), which specializes in semiconductors and other cable and satellite TV electronics hardware, splits into three companies: General Semiconductor, Next Level Systems and CommScope.
1998: Next Level Systems, which houses the former GI’s cable and satellite set-top business, changes its name to GI Corp.
2000: Motorola pays $17 billion for GI. Combined with Zenith Communications assets, GI will be the foundation of a unit that will ultimately be rebranded as Motorola Mobility.
2001: Google buys Motorola Mobility for $12.5 billion.
2012: Arris pays $2.35 billion for Motorola Mobility’s Home division, which houses the former GI assets.
2018: CommScope pays $7.6 billion to buy Arris.

ATLANTA - Telecommunications tech vendor CommScope is conducting acquisition talks with cable tech company Arris, Reuters reports.

Both companies have presence at the just-about-to-end SCTE Cable-Tec Expo Show, positioned not too far from Arris’ Suwanee, Ga. headquarters. Neither is commenting at this point.

Read More: Cable-Tec Expo 2018

As Reuters noted, Arris shares spiked 13% on Wednesday, with rumor of the deal talks hitting Wall Street.

"We see some industrial logic to the deal, but we are not prepared to believe it,” wrote Raymond James analyst Simon Leopold, who published a note on the reported deal talks. "We see very little overlap for cost synergies beyond G&A. The companies are quite different, with Arris focused on electronics and CommScope on apparatus."

WASHINGTON — Sinclair Broadcast Group’s troubles may not be over at the Federal Communications Commission, despite efforts to drop its Tribune Media deal and move on.

By most accounts — including the one detailed in Tribune’s $1 billion breach-of-contract lawsuit — Sinclair’s hard line stand on leveraging FCC deregulation to hold onto as many stations as it could, created ripples of annoyance and outrage, including at the FCC and the Justice Department.

As its $3.9 billion deal to buy Tribune’s 42 stations was under review, Sinclair recrafted the terms to try to satisfy Justice’s concerns about market concentration, but it was also trying to capitalize on ownership deregulation at the FCC while retaining relationships with ostensibly spun off stations, a move Tribune said unreasonably complicated a deal that should have, and could have, been done.

Issues of character and candor could continue to be investigated, either by an FCC judge or a bureau. That would be OK with cable operators, who have long criticized Sinclair’s retransmission-consent negotiating tactics and the power that stems from its portfolio of 173 stations.

At press time, the office of the FCC’s administrative law judge, Richard Sippel, had not returned calls for comment on what he plans to do about the Sinclair-Tribune hearing he has been charged with conducting. His decision could have a major impact on Sinclair’s expansion ambitions.

Sinclair withdrew the Tribune deal and wants the hearing terminated, but it is up to Sippel to pull the plug, a spokesperson for FCC chairman Ajit Pai told Multichannel News. The FCC voted unanimously to refer allegations of Sinclair’s lack of candor and misrepresentation to the ALJ, issues involving how the deal was presented that don’t go away just because the license transfers were withdrawn.

The commission unanimously directed the ALJ to resolve four questions. Though three were mooted by the deal’s withdrawal, the fourth — and the first the FCC cited in its hearing designation order — was “whether, in light of the issues presented above, Sinclair was the real party-in-interest to the WGN-TV, KDAF and KIAH applications, and, if so, whether Sinclair engaged in misrepresentation and/or lack of candor in its applications with the Commission.” Sinclair said it did not misrepresent the deal for Tribune’s Chicago, Dallas and Houston stations, or their potential buyers.

Settling the issue of whether Sinclair represented “sham” transactions as genuine ones, one way or the other, could serve to speed any challenges to Sinclair’s existing licenses on fitness grounds by critics of the company who want to use candor issues. One former top FCC official said Sippel is expected to terminate the hearing, but the FCC’s Media Bureau could, and likely would, still launch its own investigation of the allegations. The FCC takes character issues very seriously, he said.

One party that could benefit from the ALJ hearing, if it goes against Sinclair, is Tribune in its breach-of-contract suit. While Tribune will be making its case for misrepresentation in court, that would be made a lot easier by an ALJ decision doing the spadework for it.

Shares of wireless giants Sprint and T-Mobile soared Tuesday after a report in the Wall Street Journal said their on-again, off-again merger talks were back on. 

This would be the third go-around for Sprint and T-Mobile after starting and then abandoning merger discussions in 2014 and 2017. Talks in 2014 ended after the federal government let it be known it would frown upon the combination No. 3 (T-Mobile) and No. 4 (Sprint) wireless carriers. And last November, the two companies came close to a deal but scrapped it after they could not agree who would control the combined company.

 Sprint shares were priced as high as $6.41 each early Tuesday (up 24.7%, or $1.30 per share) and closed at $6.02 each, up 17.1% or 88 cents per share. T-Mobile shares had reached $64.56 earlier in the day (up 8.1% or $4.82 each) before closing at $63.13 (up 5.7%, or $3.39 each).

A combined Sprint and T-Mobile would have about 100 million wireless customers, making it a solid No. 2 ahead of AT&T and behind Verizon Communications. The Journal said talks between the two are preliminary and could break down as they have in past years.

Influential media analyst Craig Moffett of MoffettNathanson weighed in on the latest mega-media merger – T-Mobile’s purchase of upstart video service aggregator Layer3 TV – adding in a note to clients Wednesday that the logic behind the transaction is a little hard to follow.

T-Mobile, the third largest wireless service provider in the country, agreed to purchase Layer3 TV on Wednesday, adding that the deal would help create a disruptive new TV service in 2018. But details were scarce. Layer3 TV, although a relative newcomer to the pay TV scene, is a definite outlier – it has focused on offering more video not less, or what Moffett said was a “fat” bundle rather than the “skinny” bundle touted by practically every other upstart service.

While the cable industry was virtually founded on bringing consumers more, over the past several years consumers have pushed back against having to pay for channels they never watch. Layer 3 was founded on the opposite concept – that its customers want as much video they can get and are willing to pay for it.

But Moffett has always wondered how the Layer 3 model worked. And the purchase by T-Mobile just adds to his puzzlement.

Not every analyst agreed. In a note to clients Wednesday, Barclays media analyst Kannan Venkateshwar said the deal was a validation of the cable-wireless bundle, noting other video-wireless pairings from AT&T and DirecTV Now, T-Mobile and Netflix, and Sprint and Hulu.

“In an environment where fixed broadband is seeing prices going up, wireless companies have gravitated towards unlimited data bundles with video which, in our opinion, has been a meaningful drag on cable video subs,” Venkateshwar wrote. “What will be interesting to see in this respect is how T-Mobile bundles Layer3.”

The analyst added that he believes the competitive environment will increasingly be influenced by aggregation engines, not just for video but for the reams of data that provide the ability to map usage information with user buying habits, social media and the like to deliver customized programming and advertising.  

“Overall, we believe T-Mobile’s wireless scale and execution combined with Layer3’s capabilities and content deals makes this deal quite significant in terms of future implications for the cable industry, even though the economic scale of the deal is likely small,” Venkateshwar wrote.

Layer3 TV burst on the scene in 2014, offering a full video package to consumers in select cities, riding mainly on broadband services from other providers. It was packed with cable veterans, led by Broadbus Technologies founder Jeff Binder as CEO and CTO David Fellows, who served in the same role at Comcast and AT&T Broadband for years. Former Fox programming veteran Lindsay Gardner joined as chair of its content advisory board later that year and became chief content officer in 2015. Layer3TV provided what it called “Concierge Cable,” a full-freight cable package with all the bells and whistles, offering about 200 channels starting at $75 per month.

According to Moffett, Layer3 TV content is delivered over an all-IP network over the customer’s own broadband connection, but which rides on a “proprietary network of leased fiber rights of use between operators’ connection points.” That architecture allows Layer3 TV to essentially bypass the public internet, creating an enhanced video experience that no other MVPD can provide. Layer3 TV has called itself “the antidote to bad cable,” focusing on customers who wanted the full bundle and were willing to pay between $75 and $100 per month for it.  

But the question was always how much Layer3 TV was paying for its programming. Traditionally, new players in the content game pay top prices for programming, and there was no reason to believe Layer3 TV was any different.

In a note to clients, Moffett conceded that Layer3 TV brings strong management expertise to the table, “but it isn’t clear that their programming costs are any lower than anyone else’s (Binder conceded as much to us last month).  And it isn’t clear that T-Mobile couldn’t have negotiated their own programming agreements if that’s what they had wanted.”

Moffett wondered if the motivation was tomorrow’s expected elimination of Net Neutrality rules, but he doubted it. Advanced advertising capability could be another reason, but the analyst was skeptical of that too. He also doubted the impact the combined company will have on incumbents.

“Did anyone really need one more vMVPD to launch before they concluded that there would be cord-cutting and video margin compression in the future?” he asked. “ Would anyone (anyone) change their forecasts for the decline rate of legacy Pay TV because T-Mobile has joined the ranks of Google’s YouTube TV, Sony’s Vue, Amazon Prime, Hulu, Netflix, DirecTV Now, PhiloTV, Dish Network’s Sling TV, Pluto TV, HBO Go, CBS All Access, FuboTV, and (soon) Disney’s direct-to-consumer whatever-it-is?”

Like other analysts, Moffett agreed that linear pay TV is in decline and T-Mobile was probably always going to be a factor in helping that decline along. He just believes that adding Layer3 TV to the fold won’t change that.

Media and telecom deal volumes and values were up significantly in the third quarter, fueled by a growing belief that lighter regulation and economic benefits will prevail, according to a PricewaterhouseCoopers report.

Volumes rose 9% to 238 deals in Q3, their highest point in the past two years, compared to Q2 this year, according to PwC's Q3 2017 Deal Insights report. Values topped $31.6 billion, up 76% form the second quarter and fueled by seven megadeals. PwC defines megadeals as transactions above $1 billion in value. Leading that list was Discovery Communications’ pending $11.8 billion purchase (not including debt) of Scripps Networks Interactive.

According to PC, the Advertising and Marketing sector made up for the biggest chunk of volume – about 80 deals. In the Broadcasting sector deal volume rose 50% to 13 deals. The Broadcast and Telecommunications (42 deals) sectors, both hit two-year highs as well.  

“While the shift to digital was all the rage only a couple of years ago, market participants are realizing that a compelling digital platform may only be part of the solution and won’t satisfy sophisticated investors and stakeholders,” PwC wrote. “The ultimate goal: taking that sticky digital platform you’ve built or acquired and maximizing the underlying data to (i) improve customer engagement and (ii) identify direct or tangential service offerings, which can improve the monetization of said user base.”

Rounding out the megadeals were Crown Castle International’s $7.1 billion purchase of Lightower Fiber Networks (Telecom); and two sports franchise deals: Tilman Fertitta’s $2.2 billion acquisition of the NBA’s Houston Rockets and an investor group’s (led by Bruce Sherman and former New York Yankee Derek Jeter) purchase of the MLB Miami Marlins for $1.2 billion (Recreation and Leisure).

In the Internet & Information sector, The Walt Disney Co.’s $1.6 billion purchase of a majority stake in BAMTech led the pack,  while Atlantic Broadband Group’s $1.4 billion purchase of Metrocast Cablevision rounded out the Telecom list.

Discovery Communications is in talks to combine with Scripps Networks Interactive, according to a report in theWall Street Journal.

Terms of the potential deal couldn’t be learned by the paper, which added that another bidder for Scripps could emerge.

The report come amid difficult times in the cable TV business as more consumers drop their pay TV subscriptions and watch digital video instead.

Discovery and Scripps both own mainly non-fiction cable channels and do not have ties to the broadcast networks or sports franchises that would make them must-haves as programming bundles get skinnier.

Go to broadcastingcable.com for the full story.

In a research note yesterday, Craig Moffett said a lot more eloquently what I have been thinking for a while – despite speculation swirling around the largest cable operator in the country, Comcast not only doesn’t need to merge with a telco or another cable operator or what have you, it doesn’t seem to want to.

Ever since stories broke in January that Verizon was on the hunt for a merger – that company, by the way, needs to do something, but no one seems to want to do it – speculation is that Comcast would either combine with a telco (Verizon or T-Mobile), or buy something big and stupid (Charter, Disney again?). Aside from the obvious regulatory hurdles – the Federal Communications Commission blocked Comcast’s later abandoned merger with Time Warner Cable, so approving a merger of Comcast, Charter, TWC and Bright House Networks would seem a harder sell– it doesn’t really make sense for the company to risk a pricey and transformative transaction. It already is the biggest cable operator on the block. It already has a stable of very profitable broadcast and pay TV channels in NBC Universal. It has one of the biggest movie studios in the world with Universal Pictures – and the current box office champs in Fate of the Furious and The Boss Baby.  It has a wireless play – Xfinity Mobile – scheduled for wide release at the end of the current quarter. What else could it want?

Merger speculation heated up again after Comcast revealed that it didn’t participate as robustly as some expected in the recently completed federal spectrum auctions. That caused some pundits to pontificate that Comcast was instead keeping its powder dry for a big, transformational deal, perhaps an acquisition of Verizon, Sprint, T-Mobile, or Charter Communications.

Moffett, though, wrote that Comcast appears to be keeping its dance card clear. Or as he put it in the opening of his research note, a mock letter to T-Mobile CEO John Legere and Charter’s largest shareholder John Malone: “We’re not that into you.”

“A simpler explanation, however, is that Comcast stared into the abyss that is wireless these days… and decided they didn’t like what they saw,” Moffett continued. “Not as a spectrum buyer, or as a spectrum builder… and, most emphatically, not as a buyer of a whole company. The constant speculation about Comcast buying T-Mobile, or, no, wait… Sprint… Or wait, I meant Verizon (all of it!) must be getting a bit tiresome in Philadelphia.”  

Comcast’s first quarter earnings seemed to solidify that stance. Cable operations were humming along nicely – revenue up 5.8% and cash flow up 6.3% in the quarter, basic video additions were 42,000 and on target with estimates. On the programming front, NBC Universal had a stellar quarter – cable network revenue was up 7.6% and cash flow rose 16.8% while and broadcast revenue increased 5.9% and cash flow was up 13.4%. Retransmission consent revenue for the broadcast operation is on track to hit $1.4 billion this year, a 65% increase over 2016. And NBCU chief Steve Burke said on its earnings call that with the Super Bowl, the World Cup on Telemundo and the Winter Olympics all coming up in 2017-2018, NBCU is in the “early innings of above market growth.”

Overall, revenue in the first quarter grew 8.9% at Comcast. In contrast, Verizon’s first quarter revenue declined 4.5%.

“Doesn’t that just about tell the whole story?” Moffett wrote.

Wall Street obviously loves a deal, and Comcast has been more than willing to comply in the past. And one thing that may turn its head toward Verizon is the relative cheapness of its stock (the telco’s shares are down 12.6% this year while Comcast stock has gained 14.7%). No one, and I mean no one, smells blood and desperation in the media business better than Comcast chairman and CEO Brian Roberts.

But Verizon is different. While Comcast has been able to turn around other faltering businesses like AT&T Broadband and NBCU, the difference was they both had massive hidden growth potential and management teams that were either unable (AT&T) or unwilling (GE) to invest the time and money to right the ship. Verizon’s problems, as Moffett noted earlier, run much deeper. 

Comcast may indeed buy something, but Moffett suggests it will more likely be a smaller content company, a business services outfit, something in the international space or a small cable company. He noted that Comcast would jump at the chance to buy Cox Communications – as would practically every other operator – if it ever came on the block.

“But why does everyone think they have to do anything at all?” Moffett wrote. “Today’s [April 27] results are a reminder that Comcast’s business is much better than the businesses to which they are always linked.”

That is as good a reason as any for Comcast sitting out this particular round of the continuing media merger dance.

With the pace of deals not expected to slow anytime soon, PriceWaterhouseCoopers issued a study Tuesday that seeks to get to the bottom of why some deals, despite their synergistic dedication to thought leadership, simply don’t work out.

According to the PwC 2017 M&A Integration Survey, the main culprit for deal’s fizzling out or not living up to expectations is simply their complexity.

In the study, PwC said that high-performing deals – which it defines as transactions where respondents report significant success in strategic, financial and operational areas – dropped to fewer than 5% of the total in 2016, compared to 24% in 2013.

In addition, PwC says that only half of respondents that have done eight or more deals in the past three years reported strategic success, compared to 66% of respondents who did three deals or fewer.

“When it comes to meeting strategic goals, it appears practice doesn’t make perfect,” PwC said in the report.

PwC said about 151 respondents participated in the survey, wih 32% at ethe senior level holding the title of CEO , President, COO, CFO, CIO, EVP and SVP. The remainder were VPs from corporate development, strategy, sales and marketing, operations, information technology, finance and human resources.

Other survey highlights include:

         Success rates fell dramatically—from 45% to just 15%—for those seeking growth in market share.

         The percentage of companies that reported complete success in gaining access to new markets plunged from 58% to 28%.

PwC also found that companies are beginning the integration process much earlier According to the survey, 32% of respondents se their integration teams to work in the deal screening process in 2016, compared to 21% in 2013. The number of respondents that waited until due diligence dropped by more than half.

“Even as companies get better at achieving certain goals, they’re struggling to reach others—perhaps because their expectations are changing,” PwC said in the report. “Workforces are increasingly diverse and multigenerational, and most industries are undergoing some form of digital disruption. Though many business leaders judge it more prudent to buy than to build talent and capabilities they need to join the ranks of the disruptors. By definition, that may mean integrating a completely different type of organization, with capabilities far outside the acquirer’s core.”

The study suggested that companies follow these seven steps toward successful integrations: accelerate the transition; define the integration strategy; focus on priority initiatives; prepare for day one; communicate with all stakeholders, establish leadership at all levels; and manage the integration as a business process.

Credit rating agency Moody’s Investors Service predicts that mergers & acquisitions activity among telecom companies will continue as the industry seeks to offset low revenue potential and intensifying competition with deals.

Already the sector has seen AT&T announce a $108.7 billion deal with Time Warner in October and Century Link make a $34 billion offer for Level 3 Communications. Moody’s sees more deals ahead.

“Market saturation and tough competition have produced a stagnant US telecom market,” Moody’s said in its report. “Yet regulators remain unlikely to approve consolidation within the traditional telecom sector, especially for large incumbents, so they must look elsewhere for growth.”

Moody’s predicts that in the wake of those deals, Verizon Communications will likely accelerate its 5G mobile video strategy either through large scale M&A or partnerships.

“In our view, Verizon’s existing wholesale agreement to provide wireless infrastructure for several large US cable companies could be expanded upon for 5G in a mutually beneficial way,” Moody’s wrote.

In other possible deals, Sprint could make another attempt to merge with T-Mobile, but Moody’s believes regulators will probably squash that transaction again, unless they can prove combining the No. 3 and No. 4 wireless companies provides a public benefit by creating a company that can better compete with Verizon and AT&T.

While there has been great speculation recently regarding what Verizon will do in the M&A space, including a possible pairing with Charter, Moody’s said it doesn’t expect any blockbuster news from the phone company just yet.

“We don’t expect Verizon to pursue a mega-deal like AT&T, but think that Verizon could seek an alternative path to wireless product differentiation by leveraging partnerships to accelerate its 5G strategy,” Moody’s said, adding that it could expand its MVNO agreements with cable operators to include 5G.

“This potentially mutually beneficial arrangement would allow Verizon to leverage the cable operators’ dense backhaul assets in exchange for competitively priced wireless infrastructure,” Moody’s continued. “The cable operators would avoid very costly wireless investments and, at the same time, Verizon would prevent a new retail competitor to its wireless business. It would also place AT&T at a stark competitive disadvantage to Verizon for 5G wireless services.”

Programming distributor and OTT service provider Olympusat and Float Left, a maker of TV Everywhere and OTT video app systems, said they have scuttled their merger and will now pursue their longer-term business goals independently.

They didn’t specify why they killed the merger, but noted that the decision followed a six-month trial period. Olympusat and Float Left announced their merger agreement in April.

“Float Left and Olympusat will continue informal collaborations as opportunities are identified. This decision will allow each organization to remain focused on its core mission,” they said.

In tandem with the merger-related announcement, Float Left also announced that its opening an office in Toronto, and has appointed Scott Murrow to VP of sales for the North America region. Morrow most recently was VP, distribution for AMC Networks.

Float Left counts clients such as AMC Networks, Red Bull, Crackle, CBS Sports, and Viacom. It used the INTX 2016 show to debut Flicast, an interface/UI for connected devcies.

WASHINGTON — In a letter to the Federal Communications Commission and the Justice Department, four Democratic House members from diverse regions have weighed in in support of the Charter Communications-Time Warner Cable merger.

The FCC is approaching its 180-day shot clock on the deal (Thursday was 179), and is expected to circulate an approval with conditions late this week or early next. That would almost certainly mean the DOJ was OK, too, since it coordinates reviews.

In the letter, dated Wednesday (March 23), Reps. Marc Veasey (D-Tex.), Joyce Beatty (D-Ohio), Terri Sewell (D-Ala.) and Gregory Meeks (D-N.Y.) told Attorney General Lorretta Lynch and FCC chairman Tom Wheeler they should consider the “significant” commitments Charter has made, including on creating jobs, offering high-speed broadband (at 30 Megabits per second) to low-income communities, and its policies of no data caps or modem-rental fees.

The lawmakers said they are fine with the FCC scrutinizing the merger carefully, but urged it to give credit to Charter's diversity commitments and others, saying that combining with Time Warner Cable and Bright House Networks (also part of the deal), would only “continue to raise standards across the country.”

WASHINGTON — The Communications Workers of America has told the New York State Public Service Commission that the proposed merger of Altice and Cablevision Systems is not in the public interest and should be rejected.

The 700,000-member union, which represents 300 Cablevision employees, made its argument in initial comments to the New York PSC. The union has already urged the Federal Communications Commission to block the deal, and plans to take the same tack with the New York City Franchise Concession Review Committee and the Connecticut Public Utilities Regulatory Authority.  

Cablevision in February of last year reached agreement on a new contract with the CWA, but only after years of contentious negotiations.

The union is concerned about job losses, and about the amount of assumed debt involved in European telco Altice’s $17.7 billion all-cash purchase of Bethpage, N.Y.-based Cablevision. The CWA has argued that the deal’s heavy debt burden could put jobs at risk, so it has been pushing back on a number of regulatory fronts.

The CWA has weighed in at hearings in Peekskill, N.Y. (Jan. 26); in New York State Supreme Court in the Bronx (Jan. 27); and in Long Island, N.Y.’s Nassau and Suffolk counties (both Jan. 2).  

Altice and Cablevision have dismissed the CWA opposition, saying it "relies on selective press accounts, mischaracterization and surmise to impugn the transaction and advance its own narrow interests."

The deal partners called the structuring of their transaction sound, with demonstrable consumer benefits including network investment. They also noted that some of the deal’s debt load is the restructuring of existing Cablevision debt.

New York State has approved Charters proposed merger with Time Warner Cable, thanks in part to some new conditions the state says translate to $1 billion in investment and consumer benefits.

Charter hailed the approval as putting it in a "strong position" as it tries to get the FCC to follow suit.

The commission has paused the informal shot clock on its review of the merger, but that appears to be related to the holidays and time to review new document submissions rather than a signal of any issue. Stoppages of the 180-day clock are not unusual in merger reviews.

New York's approval comes with new commitments on high-speed broadband--60 Mbps as a minimum offfering 300 Mbps throughout the state, building out more unserved residential and commercial areas, and investing in and improving customer service, Charter said.

“This is a significant step forward, not only for Charter but also for our future customers, and we are very happy to have obtained this approval from the New York State PSC,” said Tom Rutledge, president and CEO of Charter, in a statement.

The New York State Public Service Commission said that the merger will translate into $1 billion in direct investment and consumer benefit, as well as requiring broadband speeds to double for two million customers by 2018, and six-fold by 2020.

Specifically, said the commission:

"145,000 homes and businesses currently without broadband will be offered high-speed access;

"Affordable high speed program will be offered to low-income consumers; free connection and service offered to underserved community centers;

“Broadband is crucial to driving growth, improving our education system, and connecting New Yorkers to the 21st century global economy – so ensuring that every household has access to high-speed Internet has never been more important," said New York governor Andrew Cuomo. "The merger of Time Warner Cable and Charter Communications will result in a historic investment in New York’s Internet landscape that improves quality, reliability, speed and affordability for all New Yorkers. Alongside our New NY Broadband Program, we are bridging the digital divide for underserved communities and guaranteeing our position as a national leader in opportunity, cutting-edge technology and innovation.”

Cuomo linked the approval to what the commission called a "signature proposal" Cuomo also unveiled Friday to create "the largest and most ambitious state broadband initiative in the nation to ensure every New Yorker has access to high-speed Internet by the end of 2018."

Charter Communications’ pending $77.7 billion purchase of Time Warner Cable isn’t expected to stop the flow of deals in both the distribution and content areas, experts at a Paley Center for Media event said.

“I think we’re on the verge of a significant uptick in activity,” said JP Morgan global chairman, Technology, Media & Telecommunication Investment Banking Jennifer Nason at the Paley Center for Media’s 2015 Paley International Council Summit here Thursday. “We are sort of in this disruptive vs. incumbent world in just about every industry you can think of and media is no exception. With OTT taking hold, ad models being disrupted, I think there is a lot of concern out there by all players, the established ones and the new ones, as to do I have the right assets in the right location, who are my competitors. I think when you go through periods where there is concern about what tomorrow will look like, there’s the overwhelming temptation to do deals to feel better about your position in the ecosystem.”

In the session moderated by Multichannel News/B&C editorial director Mark Robichaux, Waller Capital Partners chairman John Waller said he expects deals to move away from the typical large-company-buys-small-company scenario and instead focusing on adding new aspects to existing businesses in content, technology and distribution.

“Although some of the bigger companies will be involved, a lot of the deals will be in those three sectors,” Waller said. “It will be opportunistic buying, media companies buying digital media companies or ad tech companies, or cable companies buying fiber companies. It will be opportunistic mergers to make their business better.”

Waller added that while the climate today is different than the last big period of consolidation in the industry – the 1990s and early 2000s – the reason for deals isn’t that different

Back then, he said, the bet was on building a broadband business. And now that the infrastructure is built, the bet is the same but with a twist .

“The bet is still on broadband, but there is so much data consumption,” Waller said. “Cisco says 90% of data consumption comes through WiFi. That means you still need broadband pipe.”

Nason said that wireless, over the top and xx are attracting other players to the media business. And she said that more are likely to come.

“Traditional players have to find out how to evolve,” Nason said, adding that we will likely see some great and not so great deals in the future. She pointed to 21st Century Fox’s aborted attempt to buy Time Warner Inc. in 2014, which didn’t attract other bidders after their overtures were rejected.

“If Time Warner was to sell today, the people that would jump into that race would be very different today,” Nason said, adding that possible bidders could be consortiums of international buyers and big technology companies.

“A lot has changed in the last 12 months,” Nason said. “There is a different universe of competitors.”

Although the mergers & acquisitions market is on a pace to exceed $3 trillion in worldwide deal value in 2015 -- its best year since 2007 -- some leading U.S. dealmakers are beginning to doubt if that pace is sustainable, according to research from law firm Dykema Gossett PLLC.

According to Dykema’s 11th Annual M&A Outlook Survey, only 37% of  respondents to the survey said they believed the M&A market would strengthen in the next 12 months down from 59% in 2014. About 20% said they expected the market to weaken, compared to 9% in 2014.

 While the majority of respondents expected no change in M&A next year, the concern is the most dealmakers have shown in the survey in years, according to Dykema.

In the U.S., the law firm said M&A concerns reflected those for the overall U.S. economy – just 48% of all respondents has a positive outlook for the overall U.S. economy over the next 12 months, the lowest level since 2012.

Pockets of intense deal activity remain – healthcare and technology were at the top of the list, while media ranked No. 12. According to Dykema, healthcare M&A reached $484.2 billion through early September, up from $274.5 billion for the same period in 2014.

Technology deals experienced a similar jump, rising from $268.3 billion in early September 2014 to $356.2 billion through the same point this year.

"M&A activity in 2015 surged for much of the year, but respondents clearly are wondering how long it can last,” co-leader of Dykema’s M&A practice Tom Vaughn said in a statement. “Many of the strong overall results were driven by megadeals, but we agree with the findings that while the outlook for the next year is not as strong as it was a year ago, there is still a great deal of positive momentum in the M&A market.”

Dykema distributed its M&A Outlook Survey via email during August and September to a group of senior executives and advisers including CEOs, CFOs and other company officers. The 147 respondents to this survey represent a cross-section of M&A professionals and advisers with a diverse group of professions and more than a dozen sectors represented, including healthcare, technology, industrial/manufacturing and financial services. Respondents represent companies whose annual revenues range from under $1 million to more than $1 billion

WASHINGTON — Federal Communications Commission chairman Tom Wheeler has picked the team that will vet the latest media mega-merger, the combination of cable operators Charter Communications and Time Warner Cable.

FCC general counsel Jonathan Sallet will lead the merger review of the proposed transaction.

Sallet will chair the steering committee for the transaction team. Others on the committee include Media Bureau chief Bill Lake, International Bureau chief Mindel De La Torre, Wireline Competition Bureau chief Matthew DelNero, and Wireless Telecommunications Bureau chief Roger Sherman.

Justice Department attorney Owen Kendler is joining the office of general counsel to head the transaction review team. Kendler had been assistant chief of the Antitrust Division's Telecommunications and Media Enforcement Section at the DOJ.

Betsy McIntyre of the Wireline Competition Bureau will be deputy lead on the transaction team.

The senior FCC economist on the deal will be William Rogerson, the same official who worked on the Comcast-Time Warner Cable deal, which the FCC opposed, and the AT&T-DirecTV merger, which the FCC is expected to approve with conditions.

The Comcast-Time Warner Cable deal withdrawal will take its place alongside other mega-meltdowns in the communications space.

Back when the AT&T-T-Mobile deal cratered in 2011, Thomson Reuters compiled a list of the largest withdrawn merger proposals, and Comcast already claimed two of the spots. At $45 billion, the TWC deal withdrawal would put it at number five on the list.

Here are the top failed deals in the communications space over the past quarter century, according to that list, with the addition of the latest undone deal.