Time Warner Cable-Comcast Deal: Sorrell Weighs In

Time Warner Cable-Comcast Deal: Sorrell Weighs In

Sir Martin Sorrell, CEO at WPP, joined Bloomberg Television’s Bloomberg Surveillance today to discuss the industry impact of the Comcast Corporation (NASDAQ:CMCSA)-Time Warner Cable Inc (NYSE:TWC) deal, which was made official while he was on air.

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On the consolidation, he told Bloomberg TV’s Tom Keene, “[we will] be in a better position to negotiate more effectively for our clients on an integrated basis worldwide. Now it’s a big opportunity for us.”

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Sorrell: Comcast Deal Puts Us in Better Position

KEENE: Where you sit tell us about Brian Roberts, his father, and what they’ve done over the decades at Comcast Corporation (NASDAQ:CMCSA) to get to this point.

SORRELL: Well they’ve looked at it strategically. They’ve looked at it with a very strong vision. They’ve made acquisitions on considerable scale and been extremely effective in implementing it. And their timing has been, to date, immaculate. So I think this may be another example of it.

But it comes back to what we’re talking about before. It’s looking at the industry overall. Whatever the regulators–

JOHNSON: In other words holistically.

SORRELL: Yeah. Whatever the regulators and there are very few media magnates that really think about it globally. I mean Rupert Murdoch is probably still the leading person in terms of looking at the industry holistically 360 degrees. And Rupert never looked at the newspaper business alone, or the film business alone, or the TV business or the pay TV business alone. He looked at it as a whole.

And I think Brian Roberts and his father, of course, have looked at it very much in that way. But you know you link to this story we heard as well, about the Apple TV box. I mean the fact is within China’s Zhai Mi (ph), which is the internet-delivered mobile phone, also has a TV box that they tested in Shenzhen in 200,000 homes and have launched now nationally in China.

KEENE: Sir Martin, you at 35,000 feet care about China. Our viewers care about their cable bill. Here is a mint Bloomberg View column, Susan Crawford who’s been on the show a number of times, one of our great legal authorities on monopoly. And here’s Susan Crawford describing the consolidation of cable.

“Both companies could do better selling to multi-location businesses. Both companies could lower their overhead and raise prices. Both could charge content providers more for access to their data and TV networks.”

Sir Martin I’m sorry my cable bill’s going up isn’t it?

SORRELL: That’s of course what the regulator will look at extremely, extremely closely. And depending on how you define the market, you said a 75% share under one definition–

FU: Right.

SORRELL: One-third under another.

FU: You know what?  I’m going to have to interrupt. We have breaking news here. It is now official that Comcast is buying Time Warner Cable Inc (NYSE:TWC) in an equity deal valued at about $45.2 billion. Some other details coming out from the deal as well.

Comcast Corporation (NASDAQ:CMCSA) saying the deal adding to free cash flow per share. It sees Comcast plans to expand its buyback program by adding $10 billion at closing. That is the headline. We’ll go beneath the headline to get you more details. But this is now confirmed that Comcast is buying Time-Warner cable. All equity deal valued at about $45.2 billion.

KEENE: I’m sorry I’m going to go away from the PR of Brian Roberts who I adore. And Sir Martin, I’m sorry; this is the heart of the matter. They are “a leading technology and innovation company” are they now a monopoly?

SORRELL: That’s for the regulator to decide and that’s where the battle will be. And I’m sure it will be very interesting to see what John Malone says about that.

KEENE: But as you negotiate–

SORRELL: Or what he does about it.

KEENE: For Ford Motor and your clients worldwide, you’re talking to fewer and fewer–

SORRELL: Well this is a fact of life. I mean we talk, I sort of have 10 points, we look at 1 of the points is consolidation. There will be more consolidation amongst clients. There will be more consolidation amongst agencies as we’re seeing now. And there will be more consolidation amongst media owners. Because as you look at it holistically, if you look at it in a 360 degree fashion, you have to integrate.

And the basic, the basic problem Tom is that GDP growth worldwide is below trend. And in those circumstances people are cutting costs, focusing on costs and consolidation.

KEENE: This goes back to what you and I saw in Davos, Adam Johnson.


KEENE: This idea of simple, simple, simple. Brian Moynihan at Bank of America talking about a simpler, narrower framework. That’s what we see this morning in media.

JOHNSON: Well and it certainly makes Sir Martin it easier for you to go to Coca-Cola, global brand right?  In other words, you go and you say, I want you to create for me an entire (inaudible)–

SORRELL: Yeah and integrate everything.

JOHNSON: So how do they actually, how does this consolidation right now actually change your ability to do that?

SORRELL: Well it leverages. I mean if you look at our industry there’s a sort of duopoly developing. I mean if the number two and three companies do merge, the two of us will be the strongest factors in, on the buy side. Now you’re talking about the sell side, with Comcast and Time-Warner, so what we will do is be in a better position to negotiate more effectively for our clients on an integrated basis worldwide. Now it’s a big opportunity for us.

JOHNSON: And integrated, does that mean Twitter, it means cable TV–

SORRELL: It means everything. All of the above.

JOHNSON: It means (inaudible) which Comcast owns.

SORRELL: All of the above.

FU: Second screen, third screen, fourth screen.

SORRELL: I mean this argument about you know whether Twitter’s better than Google or Amazon or whatever, it’s meaningless really. In the end of the day it’s an integrated package. I do think Google and Amazon are the two strongest factors. But what it is is looking at it in an integrated way. And this deal today is sort of a reflection of that

FU: And getting back to the details of the deal today. Comcast is buying Time Warner Cable Inc (NYSE:TWC)’s 11 million managed subscribers. And as part of this Comcast says it will divest about 3 million subscribers in order to meet those anti-trust requirements.


FU: If you look at a map of their customer base, it’s interesting here because it does, it’s very complimentary but there’s a big swath of the country that’s left white, that is not serviced at all by either Time-Warner Comcast or Charter one of the previous bidders.

KEENE: Scarlet you’re from New York, there’s no people out there. That’s why it’s white.


FU: The urbanization of America is affecting the way that companies are lining up and how they consolidate. That’s certainly one big part of this story. But you wonder what it means in terms of pricing power as well.

SORRELL: Well it’s interesting, they’ve done their research and their homework and they’re really betting on their ability to sell the regulator on divesting, what did you say it was 3 million was it?

JOHNSON: Three million subscribers of the 11 which leaves them with 8. John Malone, Sir William (sic) what does this mean for John Malone?

SORRELL: Sir Martin.

JOHNSON: Sir Martin, what did I just call you?

SORRELL: I wouldn’t mind Sir William is


KEENE: Sir William was his great-great-great-great-grandfather (inaudible). Yeah.

SORRELL: No, not in Russia. It puts the pressure back on Malone. And you see it in Europe as well. Because you know you see jockeying and positioning between Sky and Liberty and Vodafone and all these companies that are starting to look at the cable. Deutsche Cable which Vodafone just bought.


KEENE: Right.

SORRELL: So this whole thing, the thing that we’re seeing in America is–

KEENE: Very quickly.

SORRELL: Is very relevant in the context of–

KEENE: Because this is so important with your British prism, do you perceive in Washington that cable is treated differently than the telephone companies?  They play by a different rule book?

SORRELL: Well this transaction will raise that question. And I think there is something in what you say, there is a different rule book. This transaction will be very interesting because it raises the game to a new, totally different level.


SORRELL: We haven’t seen a transaction with this scope and scale.

KEENE: So we see in the announcement of this merger. Scarlet Fu will have more details on this for Bloomberg Surveillance this morning.

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