Glenview Capital Management's positions in the fourth quarter

Part 3
Glenview Capital Management's positions in the fourth quarter (Part 3 of 7)

Why did Glenview Capital Management start a position in Comcast?

Glenview Capital Management and Comcast

Glenview Capital’s new positions include Aetna, Inc. (AET), Comcast Corporation (CMCSA), and PHH Corporation (PHH). The fund exited Apple Inc. (AAPL) and Hospira, Inc. (HSP), and upped its stake in Monsanto (MON).

Glenview Capital Management started a 1.01% new position in global media and technology company Comcast Corporation (CMCSA) last quarter.

CMCSAEnlarge GraphComcast has two primary businesses, Comcast Cable and NBCUniversal. Comcast Cable is a provider of video, high-speed Internet, and voice services (cable services) to residential customers under the XFINITY brand, and it also provides similar services to businesses. NBCUniversal businesses comprise Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks segments.

Comcast shares dropped last month after it agreed to buy Time Warner Cable (TWC) for about $45.2 billion in a deal that would create the largest cable provider in the U.S., with more than 33 million subscribers. The deal is subject to approval from the U.S. Department of Justice and the Federal Communications Commission. Comcast is prepared to divest systems serving approximately 3 million cable subscribers to keep the merged company’s assets below the 30% of the total pay-TV market as part of the takeover. As such, through the acquisition and management of Time Warner Cable systems, Comcast will net approximately 8 million managed subscribers in this transaction. According to a Bloomberg report, Comcast’s cable assets have attracted the interest of Charter Communications (CHTR), Bright House Networks, and Suddenlink Communications. Comcast recently completed the purchase of online video ad serving vendor FreeWheel for a reported $350 million.

While consumer groups are concerned that the merger with TWC might lead to pay-TV price rise, as the transaction would give Comcast access to nearly a third of the pay-TV market and more than half of the triple-play (cable, phone, and Internet) market in the U.S. Analysts expect the merger will get regulatory approval.

Comcast also announced a deal in which internet television network Netflix, Inc. (NFLX) will pay Comcast for a high-quality video experience to Comcast’s subscribers. The companies have established a more direct connection between Netflix and Comcast to provide uninterrupted access to consumers, while allowing for future growth in Netflix traffic. Financial details were not disclosed.

CMCSA hedgeEnlarge GraphThe cable giant’s 4Q earnings jumped 28.6% driven by NBCUniversal, with growth in broadcast, cable, film, and theme park segments. Comcast added 43,000 video subscribers in the fourth quarter—the first quarterly gain since 2007—driven by the accelerated rollout of the cloud-based X1 platform. This was a sharp reversal form 3Q 2013, when Comcast posted an 18% decline in earnings and saw video subscriber losses accelerate. Revenue for the three months ending in December rose 6.2% to $16.9 billion, compared to $15.9 billion in the year-ago period.

Analysts expect further consolidation in the industry post the Comcast-TWC merger due to increasing competition from satellite and telecom providers, high programming costs, and increasing shift of subscribers to online video and streaming services such as Apple, Google, Netflix, Hulu, and Amazon.

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