What Investors Need to Know About the Comcast Corporation and Time Warner Cable Inc. Merger

With all of the information and opinions floating around about mergers and acquisitions in the telecom industry, it is easy for investors to get lost. With AT&T's announcement that it's buying DIRECTV, investors may have forgotten about the pending Comcast (CMCSA 0.09%) Time Warner Cable (NYSE: TWC) merger and be left wondering if the merger will occur.

Wouldn't the merger break antitrust laws?
On the surface, the merging of the two biggest companies in telecom seems like it would create a monopoly. However, the deal doesn't break antitrust regulations. Comcast and Time Warner Cable operate in completely different regions. The FTC is meant to protect consumers by maintaining a free and competitive marketplace. Since the deal doesn't undermine competition in the marketplace, there's a decent chance it will be approved by federal regulators.

Okay, but will it actually happen?
Although the deal is compliant with antitrust regulations, there are still those who believe the merger will harm consumers and companies. 

An op-ed written by the New York Times editorial board urged the FTC to block the transaction. The article points out how the deal would harm companies such as Netflix (NFLX 2.49%) and Google (GOOG 1.06%) (GOOGL 1.10%) -- owner of YouTube. The editors point out the immense power the new company would have over internet users.

Recently, Comcast and AT&T began charging Netflix Internet Service Providers Fees as in exchange for quality internet service. If the merger is approved, it seems the mega company would have even more leverage to impose new charges and increase subscription fees. 

The FTC has been discussing a deal with the two companies that may serve as a solution to the net-neutrality issue. In the deal, the FTC will grant the companies permission to merge. In exchange, the new company must abide by net-neutrality regulations. This would put an end to Comcast's ISP interconnection fees and close the door on future service quality discrimination. 

If it gets approved who will win and who will lose?
Comcast and Time Warner Cable would definitely benefit from the merger. The new company would enjoy economies of scale and operating efficiency. The pooling of resources would accelerate innovations that could boost the bottom line. 

Consumers would benefit if the company passes its cost-savings onto them by lowering subscription rates. The combination would create technological improvements, a superior video experience, and the faster in home WiFi. Consumers would be able to enjoy a broader array of channels and services, faster Internet, and net neutrality protection -- assuming the FTC's terms are enforced.

Shareholders of both companies could benefit from the merger. Time Warner Cable claims "This combination creates a company that delivers maximum value for our shareholders." The theory is that the merger will accelerate innovation and increase profits for shareholders. Shareholders could also benefit from a more robust stock buyback program. The CEO of Comcast claims that if the transaction takes place, the new company will increase its buyback program by $10 billion. 

Netflix and Google will likely be on the losing end of the deal if the merger is forged without the FTC's net-neutrality stipulation. If the merger is approved with no strings attached, this will enable Comcast to continue to charge ISP Interconnection fees to companies such as Netflix, Google, and Amazon.com.