As with so many industries, privatization has taken its toll on the number of public cable companies. Cox Communications and Insight Communications were the first to go, and Cablevision (NYSE:CVC) is taxiing down the privatization runway, thanks to the tenacity of its founding and controlling Dolan family.
Now we're left with industry leader Comcast (NASDAQ:CMCSA), newly public Time Warner Cable (NYSE:TWC), Charter (NASDAQ:CHTR), and Mediacom (NASDAQ:MCCC). And with private equity showing no signs of running out of steam, the question becomes whether Comcast could also shed its Nasdaq affiliation in favor of private company status.
Last month, Craig Moffett, the capable cable analyst at Bernstein Research, ran the obviously large numbers that would be involved in a Comcast privatization transaction. According to his math, with the company's market value now greater than $80 billion, and with the expectation that it will generate nearly $12 billion in EBITDA this year, CEO Brian Roberts and his team likely would be able to borrow about $72 billion and add another $10 billion in equity to get the deal done.
I won't put off my Foolish friends by tossing out many more numbers, except to say that the company already owes $30 billion. Under Moffett's projections, the entire post-privatization debt load would be about $102 billion. I can't quarrel with the contention that, as gigantic as the numbers might be, Comcast could be taken private. Instead, I don't think that approach would fit Roberts' pistol, as we say in Texas.
I first got to know Comcast when it had fewer than 7 million subscribers, in the earliest days of this decade. Since then, through a spate of acquisitions, including that of AT&T's (NYSE:T) cable group, Roberts has moved the needle on his subscriber count to more than 24 million. Three years ago, recognizing that cable's distribution capabilities had run off and hidden from the amount of available quality content, he attempted to acquire Disney in what would have been a massive transaction.
However, I don't think the Roberts team is ready to slow that process of shaping their company. And the same debt capacity that would be eaten up in a privatization effort could be used for other meaningful acquisitions. Indeed, with competition looming from the likes of AT&T and Verizon (NYSE:VZ), my take is that Roberts et al. would prefer to keep their debt-raising powder dry, since another arm -- such as a wireless entity -- may be needed at Comcast to contest effectively with the phone companies.
It'll be fun to watch the further unfolding of the Comcast story. In the meantime, I believe that Fools with an appetite for media investments would do well to consider buying shares in this unusually solid company.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool does have a disclosure policy.
