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Why Comcast Is So Interested in Sky

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Comcast bags Sky

Comcast (CMCSA) has finally gained control over the 61% stake in Sky during the auction process held by the UK takeover panel. Comcast’s offer of 17.28 pounds per share topped the bid of rival suitor 21st Century Fox (FOXA) at 15.67 pounds per share, which valued Sky at $38.8 billion. Comcast’s final bid of $17.28 per share was 38% more than its previous offer of $12.50 per share and around 10.3% higher than Fox’s latest bid of $15.67 per share for the Sky stake.

In a separate deal, Comcast also received the remaining 39% stake in the London-based pay TV company Sky after Walt Disney (DIS) and Fox decided to give away their minority holding to Comcast at the same price.

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Sky acquisition was vital for Comcast

Comcast, like other cable and pay-TV companies, has been losing its video customers due to cord cutting, a trend in which traditional cable subscribers are increasingly switching over to the fast-growing online digital streaming service providers. In the second quarter of 2018, Comcast lost 136,000 residential video customers compared to 45,000 lost customers in the year-ago quarter. Comcast lost 93,000 residential video customers in the first quarter of 2018. The company has been losing its video customers for the past five quarters in a row.

Comcast was thus looking to boost its customer base, expand internationally, and strengthen itself to compete with streaming giants like Netflix (NFLX) and Amazon (AMZN). Both Netflix and Amazon have been spending on original content to attract new customers. In 2017, Netflix spent around $6.3 billion, while Amazon invested around $4.5 billion in original shows and programming.

Earlier, Comcast was seeking to acquire Fox’s film and television units. However, Comcast later withdrew its bid to buy Fox assets and decided to focus on the purchase of Sky.

The acquisition of London-based Sky could help the company revive growth in its pay-TV business and strengthen the company’s position in comparison to digital rivals. The deal is expected to turn around Comcast’s business and generate significant revenues.

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