In his usual Zen style, Time Warner topper Richard Parsons assured investors Tuesday they needn’t be skittish about the conglom’s avid hunt to buy up additional cable systems — i.e., Adelphia.
Parsons, delivering the day’s keynoter at the Bear Stearns 18th annual Media Confab in Palm Beach, Fla., was loath to mention Adelphia other than to confirm Time Warner Cable has submitted a joint offer with Comcast, advising that the bidding process is strictly confidential.
Some analysts took Parsons’ confidence as a sign that Time Warner believes it can win the day — for better or for worse.
A Bear Stearns moderator told Parsons point blank that some investors are worried about the health of the cable biz, particularly some of Adelphia’s more ailing systems. Also, Time Warner is finally on financially stable ground after its volatile merger with AOL. Why would it want to rock this newfound security?
Parsons — who is well regarded on Wall Street — said he understood any jittery nerves, but the conglom is again sound enough to make acquisitions. He said cable is a good bet and a key growth area for Time Warner.
“People are concerned that we’ll stumble again,” Parsons acknowledged before listing the advantages of the acquisition.
He projected double-digit growth for the cable business and called it “a platform we can layer with a whole generation of new products and services. Cable companies aren’t just cable companies anymore. They are becoming fully robust telecom companies.”
Regrets over MGM
Asked if he had any regrets, Parsons said he still smarts over not getting MGM, which ultimately went to Sony and a consortium of investors for $4.8 billion.
“I regret that we weren’t able to bring in MGM, but it just got to a point where we couldn’t justify the transaction at the pricing it got to. Folks on the other side had strategic objectives that were driving them,” Parsons said.
“It would have been nice to get that deal because it would have fit very nicely. … It’s unfortunate that it got away, but I feel we made the right call. It didn’t meet our return,” he said.
The joint bid submitted by TW Cable and Comcast for bankrupt Adelphia is believed to be in the $17.5 billion range.
If successful, TW Cable would likely pick up Adelphia’s systems in Los Angeles, becoming the largest operator in the country’s No. 2 television market.
Even more tantalizing, Comcast could hand over its 500,000 cable subscribers in L.A. to TW Cable if Adelphia’s creditors accept the offer. Joint bid is causing all sorts of buzz on Wall Street, including word that Adelphia wants Time Warner and Comcast to convert their cash-and-stock offer to more cash.
It’s always possible that Adelphia could decide to emerge from Chapter 11 bankruptcy and remain an independent entity.
Parsons said there are great synergies to be realized by growing Time Warner’s cable systems, such as launching new cable nets.
“If you’re Time Warner, you have this huge content side of the house that needs to have a relationship with a distribution platform that is, I would say, friendly,” Parsons said.
Upbeat about AOL
When asked about AOL, Parsons said things are looking up.
“I’m relatively confident that we can make AOL relevant today,” said Parsons, noting the marriage of the Internet and entertainment. He gave kudos to Yahoo! CEO and former Warner Bros. co-chair Terry Semel for his strides in this arena.
Parsons’ presentation at Bear Stearns just happened to be immediately followed by Semel’s.
Semel told investors his company’s growing content efforts, exemplified by its new entertainment headquarters in Santa Monica, are going to be cheaper and smaller in scale than traditional industries like TV and film.
“We’re going to play in the entertainment space, but we’re not thinking of anything large,” he told investors. “I hope it doesn’t look like TV. It should be more unique and more clever. It will be very inexpensive but hopefully have appeal to millions throughout the world.”
Semel didn’t elaborate on Yahoo!’s growing presence, which is being headed up by former ABC exec Lloyd Braun. But he and chief financial officer Susan Decker said the company would continue to license content from partners while moving to own more of the media that draws the most users and advertisers.