In Comcast-Time Warner Cable Deal, How Brian Roberts Bested Mentor John Malone; Proposed Deal Will Set Comcast’s Roberts Up as Clear Industry Leader

In Comcast-Time Warner Cable Deal, How Brian Roberts Bested Mentor John Malone

Proposed Deal Will Set Comcast’s Roberts Up as Clear Industry Leader


Updated Feb. 13, 2014 9:48 p.m. ET


Comcast CEO Brian Roberts, shown, worked the phones from his hotel room at the Sochi Olympics to close the deal for Time Warner Cable. Bloomberg News

Alarm bells went off a week ago at Charter Communications Inc. CHTR +0.34% when emails and phone calls to executives at Comcast Corp. CMCSA +1.39% went unanswered.

Charter had been hot to buy Time Warner Cable Inc. TWC +0.82% Cable legend John Malone, who controls Charter’s largest shareholder, and Comcast Chief Executive Brian Roberts had talked several times by phone, including around Christmas. Mr. Roberts indicated he was willing to work together on a deal for the struggling company, according to people familiar with the talks.

It was a high point in a sometimes competitive relationship that harked back decades, to when Mr. Malone—now chairman of Liberty Media Corp. LMCA +1.39% —had become a mentor to Mr. Roberts. In recent months, said people familiar with the discussions, Mr. Malone’s efforts to consolidate the cable industry through Liberty-backed Charter had drawn Mr. Roberts into the TWC fray.

Then Comcast went “almost radio silent,” said a person familiar with the negotiations.

Comcast had quietly changed course and had begun a sprint toward its own deal with TWC, with Mr. Roberts working the phones from his hotel room at the Sochi Olympics—sitting out all but one competition—as his top executives worked in New York with TWC counterparts to hammer out details as a winter storm bore down on the city.

Late Wednesday, Liberty executives were caught off guard to hear that Comcast had sealed a deal to buy TWC for $45.2 billion in stock, according to people involved in the talks. The deal will snatch TWC from Mr. Malone’s grasp and set Mr. Roberts up as the clear leader of an industry his mentor once dominated.

Comcast’s proposed $45 billion deal to buy Time Warner Cable will draw supporters and opponents, covering a range of issues, but it sure to draw the sharp attention of regulators in Washington. Shalini Ramachandran joins MoneyBeat. Photo: AP.

If approved by regulators—no sure thing—the deal will give Comcast 30 million video subscribers, far more than the next biggest pay-TV operator, DirecTV, with about 20 million. Comcast will have an even larger advantage in broadband subscribers, strengthening its position against Web giants like Google Inc.

The extra scale and enlarged geographic footprint will help Comcast negotiate with powerful TV-network owners over program costs and make it easier to compete with national services like Netflix Inc. NFLX -0.24% It also will enhance Comcast’s ability to invest in technology, giving it an edge in rolling out new services that can compete with companies like Sony Corp. and Apple Inc. wanting to expand in the television arena.

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A Liberty spokeswoman didn’t respond to inquiries. Mr. Roberts, in an interview, said Comcast’s technological investments will bring “a lot of momentum,” to TWC’s cable markets.

The irony is that the 54-year-old Mr. Roberts is implementing a strategy most publicly articulated in the past year by Mr. Malone, 72.

After 14 years out of the U.S. cable industry since selling his former cable firm, Tele-Communications Inc., Mr. Malone bought back in last year through Liberty’s $2.6 billion investment in Charter, the No. 4 cable operator. Mr. Malone quickly made clear he saw Charter as a vehicle to consolidate the cable industry, and TWC became his target.

Even before his interest in TWC became public, Mr. Malone told investors that cable operators could do better exerting their power as broadband providers by working together. He has observed that Netflix has become a major force in online video streaming because it operates across the country and therefore can license programming nationally. He also has said that cable operators often lack scale to invest in research and technology.

Mr. Malone’s public comments about these issues, and Charter’s takeover pursuit, helped spark Comcast’s interest, said people familiar with the situation. For years, Comcast executives had dismissed the idea of expanding further in cable.

Mr. Roberts’s turnabout on Mr. Malone is the latest twist in a decadeslong relationship between the men that started out friendly, when Comcast was a relatively small cable operator and TCI was the biggest. Mr. Malone was established as the industry leader. Mr. Roberts, in contrast, had taken Comcast’s reins from his father and wanted to prove himself.

Mr. Malone became a mentor to Mr. Roberts, helping him get onto the boards of Bank of New York Mellon Corp. and Turner Broadcasting System, Mr. Roberts said. Mr. Malone made Mr. Roberts vice president of CableLabs, the industry technology consortium, when Mr. Malone was serving as chairman. Mr. Roberts later became chairman.

But relations soured in the late 1990s, when Comcast secretly tried to buy control of TCI from the estate of the late founder, a move that Mr. Malone looked at with “great hostility” when he found out about it, according to a person familiar with the episode. Mr. Malone foiled the deal, grabbing part of the stake himself.

Still, Comcast and Liberty remained partners on other ventures, even as Comcast gobbled up cable operators—including much of what was TCI after it was bought and then sold byAT&TT -1.02% Mr. Malone, for his part, concentrated on expanding internationally through his Liberty Global LBTYA -0.61% PLC and in other businesses in the U.S., such as Sirius XM Holdings Inc.

Still, the episode left a lasting impression. People who know both men said that while Mr. Malone has great respect for Mr. Roberts, he sometimes takes little digs at Mr. Roberts, particularly in meetings with investors. In one case, Mr. Malone contrasted Liberty Global’s corporate finance strategy of using high debt levels to reduce taxes with Comcast’s more conservative balance sheet approach, which keeps Comcast’s taxes higher, according to someone who was there. As a result, Mr. Malone felt that Comcast deserved a lower stock valuation.

“John is more entrepreneurial,” said Norval Reece, a cable-industry veteran who has long known both men. “Entrepreneurs are willing to take risks and venture forth a little bit more and Brian Roberts is probably more corporate, which is not unusual in a second generation leadership.”

Barron’s Brendan Conway joins the News Hub with details on Comcast and Time Warner Cable’s $45 billion deal. Plus, what do the weekly jobless claims and January retail sales numbers mean for the economy? Photo: AP.

The tension surfaced in recent discussions about cable consolidation. In June, talking about the industry’s need to work together more collaboratively as it had done when he was running TCI, Mr. Malone publicly said “it would be very nice to see industry get back to that kind of value creation model instead of what we have now…which is in all honesty Snow White and the Seven Dwarfs.”

As Liberty and Charter began their pursuit of TWC, executives concluded they needed Comcast on their side. It was no secret that Comcast had the potential to outbid Charter. Comcast’s balance sheet has relatively less debt on it, making TWC’s roughly $40 billion market value in recent months, plus its $24.5 billion in debt, easier to swallow.

Charter is much smaller than TWC. Buying the company would result in a combination with $60 billion in debt whose bonds would be downgraded to junk level, Moody’s Investors Service has warned.

In August, Mr. Malone’s lieutenant, Liberty CEO Greg Maffei, visited Comcast, where he discussed industry issues with Mr. Roberts, including ways the companies could work together.

Then, in the fall, Mr. Malone visited Comcast’s sleek Philadelphia headquarters, partly to woo Mr. Roberts. It was an unusual move for Mr. Malone, who after a lifetime of business travel now tries to avoid it. He was greeted by Mr. Roberts, who proudly guided the cable mogul around Comcast’s state-of-the-art technology center, with its futuristic television equipment under development, said someone who was there.

The younger man appeared to be demonstrating how he had assumed the mantle of cable-industry leadership from the elder Mr. Malone, the person said.

Meanwhile, as Charter’s pressure on TWC increased, TWC executives reached out to Comcast, hoping they could strike a friendly deal with Mr. Roberts that the TWC executives believed would be better for its shareholders, said people familiar with the discussions.

It wasn’t the first time the two companies had talked. TWC had reached out to Comcast about a combination several times over the last few years, even before Charter made its approach to TWC, believing it made sense for national cable operators to merge into national entities to better compete with national satellite TV firms like DirecTV and Dish Network Corp., said people familiar with the talks.

But those talks hadn’t gone anywhere. Until recent months, Comcast had indicated to TWC and to Wall Street that it wasn’t interested in growing bigger in U.S. cable and believed it had all the scale it needed, one person involved in the deal said. “There was no pressure on them,” the person said.

Instead, Comcast had focused on expanding in content, buying control of the NBCUniversal business in 2011 and full ownership last year.

Mr. Malone helped change Mr. Roberts’s mind.

In the past several months, influenced by Mr. Malone’s preaching about the benefits of consolidation, Comcast executives began to feel that scale was needed to compete with nationwide phone companies like Verizon Communications Inc. and AT&T Inc. and international online video services like Netflix.

Late in the year, Comcast was considering a bid of its own, while at the same time talking with Charter and Liberty. Mr. Malone’s group envisaged a possible deal: Charter would agree to sell some cable systems to Comcast if a TWC deal got done, people familiar with the proposal said.

By January, Comcast appeared to be leaning toward working with Charter on a deal to split up TWC.

But in recent weeks, Comcast’s thinking shifted. Mr. Roberts and Comcast Chief Financial Officer Mike Angelakis felt that talks with Charter weren’t going anywhere.

Two weeks ago, Mr. Roberts called a meeting with his top executives: Mr. Angelakis, cable chief Neil Smit, Executive Vice President David Cohen and NBCUniversal CEO Steve Burke. He went around the room asking each his thoughts about the options on the table, said a person familiar with the meeting.

Their conclusion: Do a deal solo. Mr. Roberts delegated Mr. Angelakis to lead the deal team. Just over a week ago, Mr. Roberts placed a call to TWC CEO Rob Marcus suggesting that the two companies combine, said people familiar with the matter, putting forward a framework of a transaction that would work and discussing regulatory issues.

At the same time, Comcast started to distance itself from Charter, said a person familiar with the matter, and stopped returning emails and phone calls. At the time, Comcast’s behavior caused alarm, but Charter’s side didn’t think its partner was negotiating with TWC one-on-one, this person said.

Mr. Roberts last Wednesday left for the Sochi Olympics, which NBCUniversal is broadcasting, and negotiated by phone from there with Mr. Marcus. “There was pretty much no sleep for eight days,” said a person familiar with the negotiations.

Watching Russia’s police choir sing “Get Lucky” during the opening ceremony in Sochi, Mr. Roberts nervously jigged his leg as he spoke in hushed tones on his iPhone with his deal team back in New York, said someone who was there.

Amid deal talks and other meetings, Mr. Roberts only attended one sporting event, the U.S. women’s hockey team match with Finland. Mr. Roberts arrived back in the U.S. on Monday.

This week, with a major snowstorm on the way, Comcast officials took hotel rooms in New York so that a signing wouldn’t be jeopardized, said a person familiar with the preparations.

Before the news broke Wednesday night, Mr. Roberts phoned Mr. Malone to let him know about the deal, which was signed in the early hours of Thursday morning, said this person.

Of Mr. Malone, Mr. Roberts said: “We have traveled the world together, been partners, competitors and everything in between. I think John is incredibly smart and there has never been anybody that I’ve worked with brighter.”

—Merissa Marr, Dana Cimilluca and Christopher S. Stewart contributed to this article.

Write to Shalini Ramachandran at, Martin Peers and Dana Mattioli at


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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