Are Comcast And Verizon Eyeing 21st Century Fox's Assets?

Comcast Corp (NASDAQ:CMCSA) and Verizon Communications Inc (NYSE:VZ) are reportedly planning to acquire some of Twenty-First Century Fox Inc's (NASDAQ:FOXA) assets. While Comcast is a cable-TV giant in the United States, Verizon is the largest telecom service provider.

As per recent news, Comcast was in talks with Twenty-First Century Fox to acquire the mass media company’s assets. These assets include movie and TV production studios, cable networks FX and National Geographic as well as international assets such as the Star network in India and the European pay-TV provider Sky Plc (LON:SKYB).

These units have also been mentioned in recent talks between Twenty-First Century Fox and The Walt Disney Company (NYSE:DIS) . The proposed deal with Comcast or Walt Disney will be subject to the same regulatory norm. According to domestic regulations, no company can own two broadcast networks at the same time. While Disney owns American Broadcasting Company television network, Comcast owns NBC Universal.

Verizon also approached Twenty-First Century Fox about potential acquisitions. However, details regarding the deal have been kept under wraps.

All the above-mentioned stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Why the Convergence Between Telecom-Cable TV-Media Industry?

U.S. cable TV and telecom giants are foraying into the media industry with major acquisitions. Comcast became a media mogul after acquiring NBC Universal in 2011 and Dreamworks Animation in 2016. AT&T (NYSE:T) is currently awaiting the regulatory approval for its proposed $85.4-billion cash-and-stock deal to acquire Time Warner Inc (NYSE:TWX). Verizon has already acquired AOL and the internet-based assets of Yahoo (NASDAQ:AABA) to establish a strong foothold in the Telecom-Media space.

The convergence of the telecom, cable TV and media industry has become a growing trend in the last several years.

Massive adoption of smartphone and tablets along with continuous development of super-fast data transfer technologies have acted as a key driver of the convergence. A growing economy accelerates the demand for real-time voice, data and video. Since cord-cutting is affecting the cable-TV industry, media companies are more inclined to join operations with telecom giants.

Rapid technological advancement is gradually redefining the parameters of these industries. The market scenario is changing rapidly, owing to the aforementioned convergence. Will 2018 witness more mergers and acquisitions between telecom, cable TV and media companies?

The legacy local and long-distance wireline phone services have been replaced by wireless services. This has resulted in massive deployment of airwaves and optic fiber-based networks. Internet TV and online-TV streaming services are replacing legacy TV viewing, which has enabled the merger of content creation and distribution. Emergence of digital media and robust growth of digital advertisement are major catalysts.

Bottom Line

Business models and the economics of the telecom, cable TV and industries are transforming. Creators and distributors are trying their best to judge consumer preference, in order to make their content more personalized. Advertisement on the mobile video platform is gradually shifting from simple selling of banner ads on the mobile web to automated or programmatic ad selling.

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