Bloom_Oct_01

Bloomberg Businessweek

October 1, 2018

DREW ANGERER/GETTY IMAGES

Edited by

James E. Ellis,

Dimitra Kessenides,

and David Rocks

○ Its $39 billion buyout of

European pay-TV titan Sky

gives it global reach—at a

hefty cost

Last November, Comcast Corp. Chief Executive

Oicer Brian Roberts was in a London taxi when

he started chatting with the driver, who “was

incredibly knowledgeable about the diference

between Virgin and Sky in every feature,” Roberts

told reporters earlier this year, referring to Britain’s

pay-TV rivals. “We were learning a lot there.”

Sky’s surprisingly strong connection to U.K. cus-

tomers, as demonstrated by the cab driver, helped

convince Roberts that the European company was

worth a princely sum. Over the weekend, Comcast

outbid 21st Century Fox Inc. in an auction for control

of Sky Plc—a satellite-TV company with a TV studio

and valuable sports rights, including Premier League

soccer. Its winning bid: $39 billion, more than dou-

ble what media investors estimated the company

was worth when it went on the block in 2016.

Many investors don’t share Roberts’s vision, and

on Sept. 24, Comcast’s shares fell as much as 8 per-

cent as Wall Street worried that its global expansion

will cost too much. “They grossly overpaid,” says

Craig Mofett, an analyst at MofettNathanson LLC.

The Sky deal would propel Comcast’s debt to

at least $100 billion, placing the company among a

small group that have borrowed that much, includ-

ing AT&T Inc., which in June closed on its $85 bil-

lion purchase of Time Warner Inc. The debt could

go even higher now that Fox on Sept. 26 said it will

sell Comcast its 39 percent stake in Sky, worth more

than $15 billion—a decision that required approval

fromWalt Disney Co., which is buying most of Fox.

Comcast executives say they’re conident they

can generate enough cash low to pay down their

debt over time. For now, the company’s credit rat-

ings are unchanged, though an S&P Global Ratings

analyst has given it a negative outlook. But the suc-

cess of the deal depends on continued strength

at its U.S. business and the combined TV giants

fending of the global rise of streaming rivals

Netlix Inc. and

Amazon.com

Inc.

Comcast, which has been losing thousands of

U.S. cable-TV customers, is staking its future on high-

speed internet service. Internet subscriptions are still

growing, but if AT&T and Verizon Communications

Inc. can deliver ultrafast wireless service, they could

make Comcast broadband irrelevant.

The company also owns NBCUniversal, a collec-

tion of broadcast and cable channels, a ilm and TV

studio, and theme parks. By owning both TV pro-

grams and the pipes that deliver them to homes,

Comcast has created a hedge in a fast-changing

landscape where it’s uncertain whether content

makers or distributors are better positioned.

Sky is essentially Comcast’s European twin,

with about 23 million customers, mostly in the

U.K. and Ireland. With Sky, the U.S. company

would almost double its customer base. Like

Comcast and its X1, Sky sells a box called Sky Q,

which has a slick interface that makes it easier to

ind what to watch—and provides a rich source

of data on customer viewing habits. Unlike