Comcast NASDAQ:CMCSA shares rose as much as 17% after the company unveiled a plan to separate major media assets, including Universal, DreamWorks, NBC and Sky, into a new shareholder-owned company called NBCUniversal. The move comes as Comcast's stock has been trading near levels last seen more than a decade ago, with investors possibly valuing the broader company through the lens of its pressured broadband and telecoms business.
Comcast is facing tougher competition across both telecoms and media. In broadband, Charter shares fell about 25% after its April results, Optimum is pushing creditors toward a debt restructuring, and T-Mobile could become a stronger rival if Deutsche Telekom pursues a full merger with its subsidiary. In media, Comcast may soon compete with the Ellison family's planned combination of Paramount Skydance NASDAQ:PSKY and Warner Bros Discovery NASDAQ:WBD, while Netflix NASDAQ:NFLX still has significant financial firepower after passing on Warner.
The separation could possibly attract different investor bases, give each company sharper management focus, and create more flexibility for future dealmaking. However, the split also brings upfront costs, duplicated functions, and the challenge of dividing about $100 billion of debt across two capital structures. Comcast's enterprise value was around $175 billion, or five times expected EBITDA, compared with Disney at nine times, which may explain why investors reacted strongly to the proposed breakup.