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Decisive AT&T Victory Sets Stage for Comcast to Challenge Disney for 21st Century Fox Assets

Your move, Comcast.

The decisive win for AT&T in the anti-trust trial over its $85.4 billion acquisition of Time Warner sets the stage for Comcast to mount an aggressive bid for the 21st Century Fox assets that are at present set to be acquired by Disney for $52.4 billion.

Comcast leaders have been plotting a counter-offer for the 21st Century Fox assets ever since Rupert Murdoch and Bob Iger confirmed their nuptials on Dec. 13. Comcast made a point of telling Wall Street that it would wait until the AT&T-Time Warner ruling to make its final decision.

In the wake of U.S. District Court Judge Richard Leon’s ruling in favor of AT&T — in a 172-page opinion that deftly examines how the rise of streaming giants and steady increase in cord-cutting has reshaped the pay TV marketplace in just a few years — Comcast is expected to formally unveil its bid as early as Wednesday.

But the company has been working round the clock to get into deal mode with an intensity that suggests a bid was coming no matter how the judge ruled. Comcast has been busy arranging the financing for an all-cash bid expected to be at least $60 billion. It has also been working with lawyers and lobbyists to build the case to be made to regulators about why the cable giant should be allowed to expand its content production and distribution infrastructure and add the FX Networks and National Geographic Partners cable channels.

Comcast will hammer on the fact that its cable systems division is at heart a regional service with 22.3 million video customers and 26 million broadband subs. In a country of 120 million households, that hardly counts as a competitor-squeezing monopoly. AT&T also has much more of a national footprint with its wireless telco services and the DirecTV service, which is available nationwide in contrast to Comcast’s cable infrastructure.

Another big component of Comcast’s argument is that the Fox assets in question derive 70% of their revenue from markets outside the U.S. Comcast will point to this as a sign that the Fox deal would not give the company that much more market share on the domestic front. 21st Century Fox’s most domestically-focused assets — Fox Broadcasting, Fox News and Fox Sports — are not part of the sale to Disney.

Fox’s strong presence in international TV — notably through India’s Star TV and the U.K./Euro provider Sky — are a huge part of the appeal of the deal for Comcast. Comcast and NBCUniversal at present only take in about 9% of total revenue from outside the U.S., making diversification in overseas markets a huge priority.

Toward that end, Comcast already is in the midst of fielding a separate offer for all of Sky. Fox at present owns 39% of the company and is trying to close a deal for the remaining shares. Fox’s 39% stake is part of the assets Disney hopes to buy. Comcast in late April unveiled its separate offer for Sky, a move that was seen as a precursor for the bigger battle to come.

Having Comcast absorb Fox’s 22 regional sports networks could be a bigger red flag for regulators. Comcast is prepared to divest some of them or let them go entirely. Comcast also owns nine RSNs. Comcast will note that two-thirds of Fox’s channels are outside Comcast’s cable footprint — which means the company will have to negotiate carriage deals with rival MVPDs just like any other content owner.

On the film side, Comcast will argue that the combination of 20th Century Fox and the Universal Studios operation will result in smaller market share of the domestic box office than the combo of Fox and Disney.

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