AT&T's BellSouth Buy Could Spark Cable Consolidation

[SOURCE: MediaWeek, AUTHOR: Anthony Crupi]
AT&T's $67 billion acquisition of BellSouth could spark further consolidation in the cable industry, according to a new report from UBS analyst Aryeh Bourkoff. "Time Warner Cable could be poised to spark a wave of consolidation in the cable sector, and we believe potential candidates include Cablevision and Insight Communications," Bourkoff wrote. "We believe that Time Warner Cable could be in an acquisitive position following the close of the Adelphia transaction, expected by mid-year, at which point the company will have a publicly-traded cable currency." While AT&T's return to the video wars is expected to add another power in an already crowded field, cable may not be at the greatest risk if and when the deal is approved by the Department of Justice. According to Bourkoff, satellite operator DirecTV "currently co-markets bundled offerings with BellSouth, as well as Verizon and Qwest," which puts the DBS provider in direct opposition to AT&T. UBS estimates that nearly half of DirecTV's subscriber adds over the next three years are expected to come from its telco partnerships. Meanwhile, EchoStar's DISH Network is seen to be a likely beneficiary of the AT&T/BellSouth deal, as it already has a bundling agreement with AT&T. Speculation regarding AT&T's place in the video sphere may be premature, as two consumer advocacy groups said they would lobby the DOJ to refuse approval for the deal. Consumers Union and the Consumer Federation of America said the merger would lead to higher local, long distance and cell phone prices and would create an "unregulated duopoly."
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