The share price of Comcast has dropped today following the news over the weekend that the US cable operator had outbid 21st Century Fox to win control of Sky.
The company's stock price dropped from a Friday close of $37.90 to as low as $34.84 when the market opened this morning - a fall of around seven per cent - on the news that Comcast had won the battle for control of the UK satellite television and internet service provider.
The sharp fall indicates uneasiness over the size of the winning bid for Sky from Comcast, which is well over twice the value placed on Sky by Rupert Murdoch's News Corporation when it bid to gain outright control of Sky eight years ago.
Some analysts have suggested that Comcast has paid a high price for an old media company
In a three-round sealed bidding contest between Comcast and 21st Century Fox - which already holds a 39 per cent stake in Sky - Comcast's bid placed a value of £29.7 billion on the company, while 21st Century Fox's bid was substantially less, equating to a market value for Sky of about £26.9 billion.
"Sky is a wonderful company with a great platform, tremendous brand, and accomplished management team. This acquisition will allow us to quickly, efficiently and meaningfully increase our customer base and expand internationally," said Comcast CEO Brian Roberts.
However, some analysts have suggested that Comcast has paid a high price for an old media company.
Analyst Craig Moffett at MoffettNathanson Research, for example, told CNN that Comcast had "grossly overpaid" for a company that could be "an albatross". He added: "Satellite video distribution is increasingly becoming obsolete."
The company's consumer internet service business, meanwhile, is a low margin business. It is also dependent on regulation to ensure that BT-owned Openreach, through whose infrastructure Sky's internet services are pumped, maintains a level playing field.
Furthermore, with Sky's monthly satellite subscription prices already considered high (in order to pay for the Premier League football TV rights) scope for raising prices even further is limited, noted BTIG analyst Rich Greenfield in a research note. "It is hard to see how Comcast will be able to dramatically increase earnings," he wrote.
The Now TV on-demand service may therefore bear the brunt of price increases, but that could equally drive customers away to Netflix, Amazon Prime and other on-demand entertainment services.
Nevertheless, the market, according to analysts polled by Bloomberg, had expected Comcast to win after it aggressively gate-crashed an attempt by 21st Century Fox - currently controlled by media mogul Rupert Murdoch - to take full control of Sky.
That bid had the approval of Disney, which is in the process of acquiring 21st Century Fox, which also holds Murdoch's 39 per cent stake in Sky, in a deal valued at $71.3 billion. Comcast had also been bidding for 21st Century Fox, but was forced to pull out earlier this year.
Meanwhile, the bidding war between Comcast and 21st Century Fox has helped drive Sky's shares up by two-thirds since the beginning of the year. Back in December 2016, Murdoch's News Corp had made a bid for the company that valued it at £18.5 billion.
That had followed a bid in 2010, valuing Sky at £13.7 billion, that had to be abandoned a year later as the voicemail hacking scandal engulfed the Sun and News of the World newspapers, also owned by News Corp.
In addition to the satellite television assets in the UK, Sky is also the second-biggest internet service provider after BT, and has satellite television assets in Italy, Germany, Ireland, Austria and Spain.
Comcast still needs to persuade shareholders to tender their shares - including 21st Century Fox, which may choose to hold on to its 39 per cent stake rather than handing it over to Comcast, albeit for a very high price.
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