As it vigorously competes with the Walt Disney Company to acquire 21st Century Fox, Comcast is motivated by a specific asset: Britain’s Sky Plc.
Fox International controls a 39% stake in Sky. And according to Bloomberg, Comcast is interested in accessing the operator’s pay TV technology, which it views as having a leg up over local European competition in much the way Comcast’s X1 is superior to most other video platforms in the U.S.
Sky is Europe’s biggest pay TV operator, with over 21 million customers. And Bloomberg notes that Comcast, under the leadership of CEO Brian Roberts, has been formidable in terms of beating out competition to acquire the assets it wants. Examples cited include the acquisition of AT&T Broadband in 2001, for which Comcast outbid Cox Communications and AOL Time Warner. Comcast also notably usurped Fox and Disney for Olympics broadcast rights in 2014.
“For Comcast, which is largely domestic based, the assets would bolster its international presence, adding attractive properties including Sky and STAR, as well as Fox's South American presence,” wrote Jefferies analyst John Janedis in a note to investors this morning. "In addition, a deal would add meaningful scale, helping narrow the film gap relative to Disney, while also adding to the stable of cable networks, among other assets."
As Bloomberg notes, with Fox shareholders likely to assume major portions of the acquiring company’s stock, Comcast has a performance advantage, with its share price rising 27% over the last two years as Disney’s has fallen by 7%.
But for this deal, Disney presents a tough challenger.
“We believe Disney is the likely favorite to acquire Fox’s content and international assets,” Janedis said. “Regulatory risks around the ongoing merger of AT&T-Time Warner could suggest similar antitrust concerns regarding the marrying of additional content assets with Comcast's distribution platform. With many similarities between the Disney and Comcast assets, and what appears to be a highly probable sale outcome, to what extent taxes, succession, price, and the likelihood of approval are the key issues (in order) to the Murdochs is unclear. What does appear to be clear is a public process that will look to maximize value to Fox.”