New York City, New York – (StockNewsDesk) – 08/15/2014 — In an ethically ambiguous move that has government watchdogs shaking their heads, Time Warner and Comcast are paying $132,000 for a dinner to honor Federal Communications Commission panel member Mignon Clyburn for her efforts toward diversity.
The cable giants’ motive has come under question, as Clyburn will be ruling on their merger plan, which has been deemed monopolistic by many outside observers. This has come under scrutiny from antitrust advocates who question whether Comcast and Time Warner are trying to influence the outcome of the FCC. Comcast is one of the main sponsors of the event, contributing $110,000, while Time Warner is paying $22,000 to be a benefactor of the event.
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This has been a contentious issue in recent years as the relations between lobbyists and regulators have been muddied. Comcast and Time Warner have taken the tack of giving equally generously to both parties, targeting influential lawmakers and regulators. Following the 2008 election of Barack Obama, and the Jack Abramoff scandal in 2006, there have been stricter rules placed on lobbyists and corporate giving with a strict ban on junkets and gift giving. However, “honoring” lawmakers through a separate entity persists and has become a new method for corporations to spend their cash in Washington, DC.
Despite efforts by Comcast and Time Warner to smooth the waters, lawmakers on both sides are expressing reluctance to approve the merger. In many ways, there has been very little competition already, but instead of promoting competition, their dominance would be further entrenched.
These concerns have regularly been raised by those on the left and public interest organizations who warn of the dangers of too much power being consolidated. This time, however, free market advocates on the right are also joining them. The libertarian segment of the Republican Party has been growing in power and influence, and they are very hostile to Big Business.
This wing, led by Rand Paul, sees one of the biggest issues facing America as the incestuous relationship between K Street, Wall Street, and DC. This is a departure from typical Republican orthodoxy that would reflexively support business interests in such a matter. This type of backlash from both sides is an indication that this deal may be more challenging to get through than initially believed.
The FCC has responded by saying that they sought the approval from the ethics committee before allowing Clyburn to be honored. This has been another common strategy of the lobbying organizations who are seeing their traditional outlets shunted – create or sponsor groups to honor minority lawmakers or regulators.
There is little public appetite to bash these organizations, even if the intent is not completely altruistic. Of course, Comcast and Time Warner have vigorously denied the charges that they are looking to gain favor among FCC regulators. Instead, the companies insist that there is nothing untoward about their involvement and reflects their commitment to promoting diversity. There is some merit to this, as well, since both companies have sponsored the Kaitz Foundation for decades, although not so generously as this year.
Both Comcast and Time Warner Cable have been strong performers since the beginning of the bull market in March 2009. Here are their six month charts:
Clearly, both companies have had spectacular runs over this period of time, increasing profits and dividends at the same time. Currently, Comcast pays a dividend of 1.7%, while Time Warner Cable pays a dividend of 2.1%. In terms of the stocks, there is very little reason for shareholders to complain at the moment. Even if the merger fails, there could be a short term negative reaction, but this would certainly be a buying opportunity.
Until their uptrends are broken, the right strategy is buying the dip. For Time Warner until 130 is violated, there is no reason to change this strategy, and for Comcast until 46 is broken, the uptrend is intact. The merger is more about these companies preparing themselves against the threat from wireless carriers offering internet service and upstarts, like Google Fiber.
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