Comcast wasn’t strategically compelled to go forward with its $31 billion bid for the U.K.’s Sky — but the satellite operator has shown impressive results and is a unique opportunity for international growth, Comcast chairman/CEO Brian Roberts said.
“Looking at the future, I don’t think we have to do this,” Roberts said about the Sky bid, speaking on the cable and media giant’s first-quarter 2018 earnings call Wednesday. “Sky is a unique asset… and is aligned with our strategy of integrating programming and distribution.”
On Wednesday, Comcast announced a formal, binding $31 billion cash offer for Sky, as it looks to outflank Rupert Murdoch’s 21st Century Fox for the U.K. satellite operator.
Comcast positions Sky as complementary to its U.S. core business, although execs said the scale of the two companies would let a combined Comcast/Sky invest more in original and acquired programming. In addition, there may be opportunities to deliver NBC programming on Sky platforms, as well as Sky content distributed on Comcast, execs said.
Sky has 23 million retail customers in the U.K., Italy, and Germany. “Sky will be our platform for growth across Europe,” Roberts said in announcing the formal bid.
With the higher Comcast offer, Sky said Wednesday that it would terminate its previous agreement with 21st Century Fox; Fox said it was committed to the Sky deal and is “currently considering its options.” Comcast’s proposal is now pending regulatory approval.
Roberts compared the Sky bid to Comcast’s acquisition of NBCUniversal. “We didn’t have to do that,” the chief exec said, but NBCU has proven to be a valuable engine for Comcast’s growth since the deal closed in 2011.
According to Comcast, it expects to achieve $500 million in synergies through a deal for Sky. Of that, $300 million is on the expense side and $200 million is in anticipated revenue upside, CFO Mike Cavanagh said on the earnings call. Comcast expects “only limited impact on headcount” with the Sky purchase; i.e., it’s not expecting major layoffs.
In seeking to gain U.K. approval for the Sky deal, Comcast made several pledges to preserve the independence of Sky’s news operations. That includes commitments to: maintain Sky News’ annual spending for 10 years (at levels not less than what Sky spent in 2017); keep Sky’s U.K. headquarters in Osterley for at least five years; and not acquire majority interest in U.K. newspapers for five years.
For Q1, Comcast beat Wall Street estimates with overall revenue up 10% to $22.8 billion and net income of $3.1 billion, an increase of 21.2%, thanks to ad gains from the Winter Olympic Games and Super Bowl LII.