Cable Giant Emerges: Surveillance (2/13)

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Feb. 13 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Sir Martin Sorrell, Amanda Hesser, Peter Coy, Hugh Johnston, Raj Peter Bhakta, and David Stockman. (Source: Bloomberg)

This is bloomberg "surveillanfce." comcast push time warner aside.

Tim armstrong put foot and mouth.

The ceo of wonder repair, sir martin sorrell.

It is scarlet.

Perfect for my oysters.

Good morning, everyone.

This is bloomberg "suveillance.

It is thursday, february 13. scarlet fu joints made.

Too much of a good thing, adam johnson joins us as well.

A quiet europe this morning.

Wyatt europe.

We did get a piece of data that came out of sweden, the unemployment rate rises.

A small uptick.

Here in the u.s., retail sales.

A very big deal.

56% of the economy is consumer spending.

Initial jobless claims.

The bloomberg consumer comfort index.

Inventories with the adjustment on gdp.

Back and forth.

The numbers up and down.

Earnings before the bell.

Pepsi.

After the bell, aig, truly a. all government offices are closed today.

That is what happens when you that half an inch of snow.

Shut them down.

That is it.

An interesting day with the storm going on.

Looking at the data check.

Stocks, bonds, convert -- commodities.

Futures down seven after janet yellen's testimony.

Euro-dollar down.

A little bit stronger back and forth over the past three days.

American nymex crude under $100. we go on to the gold market.

That is a big deal.

The bulls and gold getting a little bit of confidence here over the past number of days.

Stronger yen.

Pound sterling still in business.

Scotland still part of the folds.

Scarlet fu has the top page.

Bloomberg has learned comcast has agreed to buy time warner cable for $34 billion in an all stock deal.

This would combine the two largest cable operators according to people familiar with the situation.

It is supposed to come out later today.

What it does do is leave charter communications and john malone out in the cold.

The distinctions of the deal to me, one of them is it is all stock.

What upset brian roberts is john malone and charter wanted them to pony up cash and said no.

The other issue, the divestiture of some of the other assets.

There is some concern the department of justice would not let the deal goes through as is.

How many subscribers will have to be sold off to charter.

We will have to talk to one of the reporters who broke the story overnight.

Our other front-page story is washington awarding the default for now because the senate has joined the house in suspending the debt limit until march of 26 -- 2015. what was needed to get the deal done was mitch mcconnell and john cornyn.

You wonder if that will hurt them in the midterm election come november.

Ted cruz is front and center.

He is.

He is able to appeal to constituents to say i hung in there, and i was stuff.

It was john boehner who gave ground.

John boehner looks good because he did not put up a fight.

Everybody is able to save face on this deal.

Maybe someone acted like an adult in washington.

Another winter storm paralyzing the south.

Georgia, traffic jams as far as the eye can see.

I know we could get up to eight inches where i live in the suburbs.

Winter.

Enough.

A dusting in new york.

I walked to work this morning at 3:30 and it was a lovely morning in new york city.

There was no salt on the ground.

There has been some concern as to whether there is enough salt.

According to the president of the federal salt bureau for lack of a better description, we have plenty of salt.

The issue is the bottleneck.

There are only 10 minds in north america.

The big one is in ontario.

So there is plenty of salt.

It is a question of getting the salt down to places like atlanta.

Where else will you get a salt map ? does this mean we need a salt treaty?

Where is richard nixon when we need him.

There is the front page.

Unbelievable.

Getting to the comcast story because that is front and center.

Shares are moving up to one .4% in the premarket.

Time warner up almost 11%. alex sherman summing this up.

All of the deal, the emotion.

A lot of emotion in this deal that truly affects every american.

Esther sherman joins us here on bloomberg.

What is my one need to know about this transaction?

I would say they need to know is customers in many different markets, major markets that time warner serves, new york, dallas, l.a., they are going to get a better product.

Comcast technology has been better than time warner cable for years and years.

They have more money invested into the technology, a better user face.

An overall aster internet speed.

A better tv everywhere product.

The technology that allows you to watch programming online.

All of your consumers win.

The question is, will regulators allow them to buy everything?

That is still an open question, but one would tank -- think they have of -- think they have done their homework.

How big of a loss is best for john malone and charter?

How big of a defeat is this for john malone?

A great question.

John malone has been very public about pushing the consolidation narrative.

He says they need to consolidate because the cable network industry and the broadcast industry in the united states have the ability to have pricing power.

We saw it with time warner cable and cbs.

They basically eight time warner cable's lunch in that negotiation because they needed the ball programming -- football program and that they could not push back on pricing and they were able to win the battle.

By getting larger, this large entity can push back on the programmers and say you play by our rules.

You cannot raise prices by 20%, you need to go much slower otherwise we will drop your channels.

More consolidation to come, and if so, who would buy who?

Packets to the second question, how big of a defeat is this for malone?

Even though he has pushed the consolidation narrative thomas he now turns it over to the comcast ceo, brian roberts, but will he walk away?

There are many other small cable companies around their.

We will seep.

Looking for that on this merger.

Front and center, sir martin sorrell joins us.

The world's largest advertisement agency.

Wonderful to have you here.

They seem to be delaying the evil day.

They seem to be pushing it into quarter three as of yesterday.

Your industry is in the dynamic stage right now.

Everyone trying to capture cash flow.

Is there too much of the consolidation of the cable company in america?

I think that is a reflection of what might happen.

There was a very interesting article recently on netflix and the future of television or future of the networks.

I think this is just a reflection of concern in the table industry about the ability for someone some time to deliver television programming for free.

Within your perspective and linking it to the different media, should washington pushed back?

My view on regulation is the less, the better.

I think the answer is there will be heavy regulatory scrutiny.

I think that is a big issue.

I think that is why they have indicated that some assets will be disposed of.

If you look at the coming together of these companies, and it is not official, but if you look just the cable, they would demand three quarters of the market.

If you look at direct tv and others, it is only a third.

Which becomes more relevant?

I think it is the big excerpt.

The regulator may take a very different view.

How the regulators or the ftc or fcc look at it in terms of market segmentation is a critical issue.

The point you raise is critical.

From our point of view and clients, it is the whole range of things.

They are becoming increasingly interchangeable.

Sir martin with us on the transaction.

Not announced the looking for it sometime today.

Twitter question of the day, which is more frustrating your cable service provider, airlines or washington, d.c.? that is easy.

Adding to company news starting with the new set top box on the way.

The company is talking to time warner cable and other providers to add digital content.

Apple hopes to introduce the device by april and have it ready to sell by the holidays.

Warren buffett looking to end a long-term investment.

It talks to end his $1 billion stake in graham holdings.

The change comes after they sold the washington post last year.

They may swap assets as they unwind the investment.

They've held shares for more than 40 years.

A surprise drop in profit at b&b parabolic.

-- bnp paribas.

The slide came after they put aside $1 billion for a legal provision.

The bank has been reviewing transactions that may have violated u.s. sanctions.

At its today's company news.

Coming up on surveillance, the death of the brand in the u.s. does not always mean it is out of commission globally.

He will discuss on the brands achieving success overseas.

Mr.

donut anyone?

Tom will have a dozen.

Good morning, everyone.

Not that good of report for john chambers and cisco.

Up up and away at tugboats but yesterday some challenges.

10:00 this morning.

Look for that on market makers.

A very important interview.

Scarlet fu and adam johnson.

Another anger -- angle.

I do.

We're going to talk about zombie brands, old france that never really die off.

They are reborn and other parts of the world.

Everyone has a different story.

A couple of examples.

Block buster last video rental store in the u.s. last month but prospering in mexico.

Mr.

donut, they were here in the 1980's. they only have one store outside of st.

Louis but all over japan.

Woolworth's now has staying power as a brand name in australia as a grocery store.

South africa.

Pamn am on clothing lines, luggage.

Over the shoulder strap.

Someone in japan bought of the license to sell other items in japan over the past year.

Look for luggage in japan.

What about blackberry?

Is this the brand that dies?

I am very fond of my blackberry.

I still think it is extremely dependable.

Hurricane sandy i lost a lot of my ipad e-mail.

The blackberry network was much more secure.

I do think with new management they have a shot.

I would not write them off completely.

Brands in china, talking china specifically, will threaten to be the largest consumer market in the year, it it will have gdp according to 34 trillion.

India one have the largest population.

If you think about brands in the appeal to population, there is no back edge.

What they represent is western culture approach.

That is attractive.

A lot of the brands get new lives.

You see that in the car market with general motors.

Chevrolet and buick in china have been positioned totally different.

A contrast from what some would say as the loss of power of american military power and the rise of consumer brands overseas.

Has the crisis diminished overseas appetite for americana overall?

America has a fantastic opportunity.

Rand america has two big strengths.

One is oil self-sufficiency.

The second is manufacturing techniques that will readdress the labor costs.

The capital input for three deep printing, -- 3-d printing is very low.

Allied with the oil gets america, i think, a fantastic opportunity.

You never write off the americans.

3-d printing is just an example of new technology.

These are technologies that rebalance the manufacturing economy.

This is something we will continue to discuss.

Sir martin sorrell, ceo of one of the biggest advertising agencies in the world.

Max at the moment.

On the cover of the new businessweek out on shelves tomorrow, a look at the politics , equality and fight for a new and among wage.

President obama wanted $10.10. government contractors will get that by executive order.

This is all coming up on bloomberg television, streaming on your tablet, your phone and bloomberg.com.

? good morning, everyone.

It is a winter storm.

A challenging winter for the eastern seaboard.

70 degrees or something in sochi.

Not here.

We look for 5, 6 inches in manhattan.

Much more from atlanta and up to boston.

Here in washington, real snow.

The white house beautiful on a february morning.

Good morning, everyone.

Scarlet fu and adam johnson with us.

Speaking of the winter storm, it has shut down washington, d.c. government offices are closed in the capital.

You just predicted eight inches of snow may fall in the district and surrounding area.

Here in new york, we could see a foot before this winds down.

If you are going to work, you better get there quickly.

Appearing -- appealing to the main rival to -- appealing to the government.

Made a pitch to maintain stability.

Olea berlusconi, anyone?

Where is he when they need him?

College dean that may have a comeback under way.

She has found a new backer or her business.

Investing as much as one hundred million.

Her popularity plunged last year when she admitted to using a racial slur.

Those are your top headlines.

Lex we digress from time warner cable and the challenges in washington.

Time for morning must reads.

This goes to the very fabric of the united kingdom.

Sir martin sorrell with us this morning.

Scott went in the raging debate over the currency that independent scotland will use.

This would quickly be agreed upon, post-independence.

Then we go back 70 years.

He who controls the currency controls the currency.

Can scotland go independent?

This raises a big question because the prime minister canyon -- cameron is interested.

The answer to your question is it introduces uncertainty we really do not need.

Is david cameron literally a martyr as he save scotland versus tories who do not care?

The big problem is they have no standing, no position in scotland.

They virtually get no votes.

Used to be strong in scotland many years ago.

And the liberal democrats and the scottish national party as well.

This is a big issue.

It will cut of the u.k. into small parts.

We will continue this discussion was sir martin sorrell.

A busy morning.

Good morning.

? first, bloomberg.

If you are just waking up, a major burger.

Time passed -- comcast acquiring time warner cable.

Post, yellen.

No yelling testimony today.

Half an inch in washington.

-- no yellen testimony today.

There are the markets.

Nymex crude back under $100 or bear role.

The top story this morning, without question, comcast cable to buy time warner cable as they go after new york city media.

A lot more going on for that.

No cash and stock.

Looking at advertising and media.

You look at the merger and what the roberts family has done, tell us about brian roberts, his father, and what they have dubbed over the decades at comcast to get to this point.

They have looked at it strategically, with a very strong vision.

They've made acquisitions on considerable scale.

The timing has been immaculate.

I think this may be another example of it.

This is looking at the industry overall.

In other words, holistically.

There are very few media magnets that think about it globally.

Rupert murdoch, please still the leading person in terms of looking at the industry: sickly -- holistically.

He looked at it as a whole.

I think brian roberts and father have looked at it very much in that way.

The apple tv box.

The fact is in china, the internet delivered mobile phone has a tv box that they tested and 200,000 homes.

U.k. are at -- about china.

Our viewers care about their cable bill.

Here is a meant column.

Susan crawford am a one of the great legal authorities on monopoly.

Here is susan crawford describing the consolidation of cable.

Both companies could do that are selling to multi location businesses.

Both companies could lower overhead and raise prices.

Both could charge content providers more for access to data and tv networks.

That is what the regulator will look at the extremely closely.

Depending on how you defined the market, a 70 five percent share under one definition, a third under another.

Breaking news.

It is now official comcast is buying time warner cable in an equity deal valued at 45 point two billion dollars.

Other details coming out, adding to free cash flow -- free cash flow.

Climbs 10 billion at closing.

We will quote but need to get the headlines.

I will go away from pr of brian roberts who i adore.

It will be very interesting to see what john malone says about it.

You are talking to fewer and fewer.

This is a fact of life.

I have 10 points we look at.

One of the point is consolidation.

There will be more consolidation amongst agencies.

There will be more consolidation amongst media.

As you look at this holistically , you have to integrate it.

The basic problem is gdp growth worldwide is a below trend.

People are focusing on cost and consolidation.

The idea of simple, simple.

Brian moynihan at bank of america talking about a simpler, narrow work framework is what we see this morning and media.

It certainly makes it easier for you to go to coca-cola global brand.

You say i want for you to create for me.

How does the consolidation change your ability to do that here go it leverages.

There is a duopoly developing.

If the number two and three companies merge, the two of us will be the strongest factors on the buy side.

What we will do is be it a better position to negotiate more effectively for our clients on an integrated basis worldwide . integrated, does that mean twitter, cable tv?

All of the above.

You argue about whether twitter is better or google.

It is meaningless really.

I do think google and amazon are the strongest factors.

What it is is looking at it in an integrated way.

This deal today is sort of a reflection of that.

Comcast is buying time warner cable 11 million managed subscribers and will divest 3 million subscribers in order to make the antitrust requirements.

If you look at a map of the customer base, it is interesting because it is very complementary but it takes water of the country that is not serviced at all by either time warner cable -- that is why it is white.

There are no people out there.

The companies are lining up and how they consolidate is one big part of the story.

You wonder what it means in terms of pricing power as well.

They have done the research and homework and are betting on the ability to sell the regulator divesting.

John malone, what does this mean for john malone.

They make great grandfather.

Not in russia.

It puts the pressure on malone.

You see it in europe as well.

Use the positioning between sky and liberty and vodafone and the companies that are starting to look at cable.

The thing that we see in america is very relevant.

This is so important with your british prism.

Do you perceive in washington cable is treated differently than telephone companies?

This transaction will raise that question.

I think there is something and what you say, a different role book.

This transaction will be different because it will raise the game to a totally different level.

So we have seen the announcement of the merger.

Scarlet fu will have the details.

We know there is a snowstorm in the u.s. erling towards new york.

There is political storm in italy.

We will be heading to rome next to get the details from hans nichols.

Stay with us.

? good morning, everyone.

A surveillance correction for you.

Adam johnson incorrectly called sir martin sorrell sir william sorrell, his great, great grandfather.

Getting to adam johnson right now.

Top headlines.

Facts we are going slowly.

The record cost for the sochi olympics could go even higher.

Russia may have to spend another $7 billion to maintain the olympic and use.

This is according to russian government officials.

They are the most expensive games ever.

They have are at cost 44. china targeting lower growth, 7.5% growth.

Exports grew 7.9% last year.

The new target distributed to government ministries and local governments or their planning purposes.

Curious how they come up with a to and china.

Derek jeter, retirement set.

Who knows, they might produce someone better.

Set off a frenzy for tickets at yankee stadium for his home game.

The last count game.

The average price surged more than 160%. $804. after the game, jeter and the yankees will travel to boston to his -- close out the season against the red sox.

Hans nichols miraculously there is ramsey the second.

We go to hans nichols and italy.

The best perspective.

In about two point golf hours -- 2.5 hours the mayor of florence will stage a coup against someone in his own party that is the current prime minister and force him to hand over the reins of the prime minister ship to him.

What would essentially happen is the third nonelected prime minister of italy.

We will see how this all shakes down.

All analysts expect he will make his move in just a couple of hours.

What will be the outcome of this for the rest of europe?

How critical is this moment for all of the european union?

Right now the markets in general do not seem overly concerned about that.

That could change if you have snap elections and have more uncertainty and italy and there is a feed on affect elsewhere.

And you look at the fundamentals of the political and economic situation, they have it debt to gdp situation second only to greece.

They have 40% youth unemployment.

If he does become prime minister, in some way he has a very difficult challenge, despite his political skills.

He is just 30 nine years old, great political skills but will be very difficult to turn this economy around and have any sustainable growth.

Hans nichols, thank you so much.

We will look for that in the next two hours or so.

Sir martin sorrell with us of course.

You mentioned earlier about the future of the european union.

This is another example.

I just think the timing is interesting.

I disagree with what you just said.

I had a session with the italian government just before christmas.

Italy is bumping along the bottom.

France is the dome stretch.

Spain is on the uptick, although very high levels on unemployment . having said all of that, i think the italian situation is quite interesting.

North of italy always responds well when germany does well.

Germany is doing ok.

To reno, milan, very strong family companies.

I think the timing, if he does go for it, is really interesting.

He is very charismatic, young.

He represents a new phase of italian policy.

We will see what happens.

Or martin sorrell on italy.

We have photographs this morning.

Top three photographs of the day, starting with number three.

Eight rare corvettes swallowed by a sinkhole.

This was inside the national corvette you he in kentucky.

-- corvette museum ain kentucky.

Imagine walking into this in the morning as a security guard and this is what you seek.

How do you do damage control on this?

It is kind of hard to fathom.

I guess they laid a concrete slab over a field.

Moving on to number two.

The fire department estimates -- where are we for number two.

Temperatures hitting 60, 70 degrees.

Hard to fathom.

They do not need coats over there.

They should beast snowboarding -- be snowboarding in bikini tops.

They should.

What do you do in sochi?

The western perch -- press does not give it a good read.

It is a resort on the black sea.

It is in our by train from downtown sochi.

Very interesting to see what will happen.

That legacy issue is an interesting issue.

I was told he attended either four or six rehearsals personally for the opening ceremony, which was extremely impressive.

I thought it was great.

Derek jeter, number one photograph of the day.

2014 will be his last season after 20 years.

He has won five world series.

Bassist roland at bats' you find a $1.12 million deal.

-- signed a $1 million deal.

For my morning must read i picked what eric jeter wrote on his facebook page.

He made the announcement on facebook.

He said i realize some of the things that always came easy to me and always fun had started to become a struggle.

I always said when facebook starts to feel more like a job, it would be time to move forward.

Next reason there is no a-rod to overshadow him at all.

Greatest place in the history of sports.

Coming up, whole foods reported earnings yesterday with a mess we will talk about the big business as the competition ramps up.

That is coming up next.

? this is bloomberg "suveill ance." taking a look at the early movers in the premarket.

Whole foods is among them.

They gave up forecast that this of pointed investors.

They lower the investment because of cannibalizing sales from existing stores.

We know they are lowering prices to attract more customers in general, not just the higher and customers.

Using its own generic ramps to help drive traffic.

It is a dangerous store.

Because every time you go in there, you spend hundreds of dollars.

Remember, part of the reason they missed is they are lowering prices.

This is the issue.

Value as opposed to premium pricing.

Do we all live in an amazon world?

That is part of it.

Gourmet magazine i read cover to cover.

One of the most 50 influential women in food.

She is with food 52. whole food earnings may have tanked but war -- oysters.

I would suggest naked cowboys with organic spinach grown as an idea.

They are all the rage.

Can they expand out to a greater part of america?

I think that has been happening for a number of years.

We are at that point right now where we see where it can go.

People want to know about the stories behind the food.

Where the ingredients are coming from.

How they were made.

Really, having more of a personal connection with the foods they are buying.

You have a partnership with whole foods.

How did that come about, and how does that solidify your credibility?

They were starting a cooking program.

They were building them out and wanted to really focus specifically on cooking.

So we build a site for them.

We worked very closely with them for two years and i think what they realized is they were doing a really great job of getting people to buy great ingredients.

But there is another step.

Connecting with customers in the kitchen.

Most grocery stores milk is the farthest away from the store because they want to go back to the milk.

In whole foods, it is kale and usually they run out of it.

We've explained to me.

It is a superfood.

Are you kidding me?

The most important search food for me is pizza.

Beginning of pizza, our single best chart hex that up nicely.

We like pizza a lot.

One in eight americans consume pizza on any given day.

This is from the u.s. department of agriculture report called what we eat in america.

Boys between the eighth of six and 19 lead the way.

One in 48 pizza on any given day.

-- one in 4 eat pizza on any given day.

We experience the stay late.

You're talking about a generation of people that have to do this as well.

Stimulate consumption among the older age category.

Where are we on junkfood food?

Pizza is not a junk food.

I consider it the lowest common denominator food.

It sounds bad, but the kind of thing that is the universally loved food.

When there is any kind of get together, people served pizza because they know it is safe.

The really interesting thing from a regulation point of view, in mexico they introduced the sugar tax.

The government is raising money.

They said this is better for the money -- better for the economy, reducing diabetes.

Quite interest thing thing that they did their.

The government policy might force food and drinks to look at in a different way.

A good pizza is very healthy.

I do not know if it would apply.

Quickly back to food 52. i go back to how food was different.

You have evelyn -- revolutionize the food business.

Where will we be in five years?

I think people will just be eating better.

They are eating kale, something that five years ago people would not have considered.

Ok.

going to a foreign exchange report.

Sir martin sorrell foreign exchange.

We say thank you.

The british pound.

The euro sterling.

Soon coming to a surveillance near you.

Sterling scottish.

We will be back.

This is bloomberg "surveilla nce." comcast acquires taymor -- time warner cable.

Is it too big for america.

Pepsico reports we do not speak to bruno mars.

David stockman is trouble.

He joined us and we speak as -- speak to the fractious family known as the republican party.

Good morning, everyone.

Here live from bloomberg world headquarters in new york.

It is thursday, february 13. joining me our expert on bruno mars, scarlet fu.

Sweden's unemployment rate picks up slightly to eight point two percent.

Futures in europe that are trading down.

Meanwhile i'm in the u.s. we have retail sales that are a big deal.

The weekly jobless numbers.

The bloomberg consumer comfort index.

10:00 business inventories.

Earnings, pepsi, it looks like it just comes out with earning slightly better.

One dollar five science -- one $1.05. boosting the dividend and increasing the buyback to $5 billion.

A big boost.

That is a big deal.

No prices yet.

We will let you know when they do finally start trading.

We should point out after the bell we have plenty of more earnings.

Aig, craft, truly up.

Government offices closed because of the storm.

No yellen testimony because of the storm.

Correct.

Betty liu speaking with the cfo of pepsico.

We will do that in a bit.

Announcing a five-year $5 billion productivity program.

Cost cutting.

It inc.

Two company news.

Warren buffett looking to end a long-term investment.

In talks to exit the $1 billion stake in graham holdings.

The two sides may swap assets as they unwind the investment.

Buffett has held shares for more than four decades.

Shares of cisco down four percent in premarket trading.

Forecasting sales that may all short of analyst estimates.

They blamed weakness in emerging markets in slump in demand from telecommunication service providers.

A surprise drop in profit.

Frank's -- france's biggest bank posting profit up 170 $4 million.

The lowest quarterly results since 2008. this comes after they put aside a billion dollars for legal provisions.

The bank has been reviewing transactions that may have violated u.s. laws.

Lex time warner cable pushing john malone and charter aside.

Four years craig moffett's black book was the required read on the cable business.

Craig moffett joining us this morning.

No surprise here i guess, but a lot of distinctions.

What do we need to know about the future of comcast this morning?

Good morning.

There is some surprise.

As recently as yesterday we were hearing that comcast was going to enter into a friendly agreement with charter to acquire time warner cable together.

The news that they have done an end run around carter and a friendly merger came as a shock to just about everybody last night.

A shock in terms of who ended up with time warner cable.

The backstory of who wants to buy who is pretty complicated.

Why is time warner cable so valuable when it consistently ranks last in customer satisfaction surveys and loses subscribers?

A great point.

Time warner cable is a struggling asset.

You are putting together the black and the white of the best operator in the business and the worst.

At least in terms of operating metrics.

It is never as simple as that.

Things are never as good as they seem and as bad as they seem, but at least on parent -- paper there is a huge disparity in the operating metrics.

Cable bills go up you go that is the question the department of justice will look at.

This is a very unusual type of merger.

Cable companies do not compete with each other.

You get horizontally bigger.

It does not change the competitive dynamics in any individual market.

The department of justice and sec will not review this through the traditional lines of hhi, the concentration lens you would use.

You could argue it would lead to lower bills in that the combined entity, if the merger is allowed , what have more leverage to get lower programming costs.

This could flow through the consumer.

Let me jump in because we will run out of time.

There is a discussion about 3 million subscribers getting sold off to charter.

What is the status of that aspect of the deal?

They have not named charter as the potential buyer.

Although that was the way i read it, too.

I am not sure what spinning off 3 million subscribers really does in terms of making it more palatable, other than it gets through them -- gets them through the magic number 30 million subscribers.

The real challenge is monster versus monster.

If the sec and d.o.t. -- doj are concerned about creating a monster in comcast time warner cable to restrain another monster, it may not be the right answer.

They will look very hard at the question, whether this is pro-consumer.

Stay with us on the phone, because we want to bring in peter cook, our chief washington correspondent.

He joins us from washington.

This comes back to the very active department of justice.

Very critical of a potential deal.

Why would the doj let something like comcast and time warner cable go through?

I think you are referencing the sec, which will play a role in deciding whether this is in the public interest as well.

That may be the larger test for this deal.

30% control of the market is a big issue for the federal government and has been a magic number tossed out there.

My understanding is comcast may offer to divest subscribers to get below that.

The combination between number one and him -- and number two, the federal government will scrutinize this very carefully.

Again, as craig pointed out, there are other issues about what this does in terms of the competition.

There is the other side, the programmers.

This will require scrutiny.

Comcast has the opportunity to sweetness for the government and could offer to commit to net neutrality as it did with the nbc deal.

Lex let me cut to the chase.

Why is the cable tv industry different than the telephone industry?

Why is comcast time warner different denver rison and t-mobile?

-- different than verizon and t-mobiel?

Le?

we do not get time warner as an offer in d.c.. that is the biggest issue on the surface.

Still number one and number two getting together.

There have been questions about how aggressive the obama administration was on the anti-trust in the first term.

I sense that changes would maybe toughen things up.

This will be a real test for the obama administration.

I will point out there was a top comcast executive of the state dinner the other night.

They have some friends in high places.

I want to bring in craig moffett.

If we expect more consolidation to come, and we look to who might buy who next, would that deal, what the next couple of deals be struck from a position of strength or weakness?

I think it is becoming more and more of buyers market because the small guys are struggling on programming costs.

I suspect you probably will see more deals.

Everything will probably be on hold until you find out what the government does with the deal and whether they allow comcast to move forward with back user -- acquisition.

It would change the landscape if they do not.

Then you can imagine smaller cable operators like media, or even some of the very small privately held players looking like attractive acquisitions for some of what has now become the lower end of the mid tier for people like charter.

Sir martin sorrell, craig just said this changes the media lambs cape from his point of view from cable.

I think this just reinforces what we have seen in a number of the services industry.

It really goes back to cheap money.

If you borrow money in the 30 year bond market like we did last year, three percent net of taxes, at least in theory without feeling the wet.

I think the long-term cheap money, plus good management and opportunity means more consolidation.

The rich get richer, the big get bigger.

This is brilliant.

Thank you so much.

Peter cook.

Craig moffett.

Scarlet.

Twitter question of the day, what is more frustrating, cable airlines or washington?

Tweet us.

Good morning, everyone.

A busy morning.

This is important, the president yesterday signed an executive order on a minimum wage, $10.10 per hour for u.s. government contract workers and would like to expand that across america.

The cover of bloomberg's business week.

Peter cory joins us.

They will not allow the streets of his new jersey.

Good morning.

What do i need to know on this raging debate of the minimum wage?

This is a great question.

We have it as the cover story in the new issue of bloomberg businessweek.

My editor asked me a few weeks ago, what should the minimum wage be?

As i dug into it, i said this is not an easy question at all because i has so many different moving parts to it.

There are the economics about which there is more question than there used to be than the moral issue like what is right, and then there is the engineering issue, given the fact that you get different answers from economics and social justice, what ultimately should you do?

$10.10 is about half the median wage in this country.

The median wage.

How does that compare historically to what we have seen with that relationship?

It goes back to the way it was back in the 1960's and 70's, but it declined.

$7.25 had been the minimum wage since 2009 is well below half of the median wage and has lost dying power.

Bringing it up to $10 $.10, the president's proposal not just for the executive order but minimum wage in general what been by a narrow margin the highest ever in terms of buying power.

I look at the minimum wage in the research you have done.

What is the republican state, those against raising the minimum wage, what is the most cogent point?

Philosophically they argue the minimum wage is interfering with private contract between consensual adults and no reason the government should get involved in that.

If someone wants to work for a certain amount of money am a why should the government get involved?

But if you do not buy that,, you might still think the people against minimum wage have a good point, which is that it could destroy jobs.

The argument is you might be worth five dollars an hour, but you are not were seven dollars $.25, so you lose and would be out of work.

Thank you so much.

We will have more.

Good morning.

? good morning, everyone.

I am tom keene.

With me is adam johnson and scarlet fu.

Derek jeter retiring with top headlines.

We're going to kick it off with another winter storm spreading ice and snow in the south that has forced the shutdown of government offices in d.c.. forecasting eight inches down there in washington, d.c.. could be even more in new york.

Finally will move into in -- and to new england.

The record cost for the olympics could go higher.

Russia could spend an additional $7 billion to maintain the new infrastructure.

This is according to government officials.

Sochi games are already the most expensive year to date.

Shocking when you think about it.

Derek jeter's retirement setting off a frenzy for ticket buying at the yankee captain's last home came.

The average ticket price has surged or that 160%, 800 four dollars.

That is what one tip -- what one ticket will cost you.

The surveillance outing.

Excellent.

After that game jeter and the yankees will travel to boston to close out the game against the red sox.

Those are the top headlines.

The last of the original four.

There will not be any a runs to overshadow.

I might point out quickly that drew is quickly considered to migrate to the yankees.

That would shift the imbalance.

The dreaded new york yankees.

I am holding up my new york yankees mousepad.

We say good morning to bloomberg radio.

Our deepest sympathies ugly talk about derek jeter.

As we all struggle with the concept, here is something that might help, a new whiskey.

Breaking into an already saturated market.

We are talking about whistle paid founded back in 2000 seven and has makers mark on staff.

That was quite a coup.

Aiming to create the finest whiskey in the world.

$72 per bottle.

The maker in for mod.

Why did you launch this?

It is such a crowded market.

Actually, in our area it is virtually uncontested.

Literally no old rye whiskey.

Over 10 years old.

Anything with an aged statement.

When you look at american whiskeys, traditionally you do not see an aim statement on the bottle.

Which is why the high end of whiskey -- would you these explain why my youngest child is sending $72. like she has a real eye for value.

What he is getting at is distinction.

What sets it apart from really good competition?

It is really simple.

We have never in the united states allowed whiskey to age long enough to meet the full potential.

At 10 years old, there is no one else in the market who has an old rye.

Given enough time, better than any single malt scotch out there.

This is not in barrels.

You are putting it in bottles.

Lex we are aging it in barrels.

It is clear in goes into the barrel and spends 10 years in the barrel before comes out and goes into a bottle.

Overlooking middle barry college.

How do you fight the kentucky mystique?

Rye whiskey is northeastern.

Kentucky is fueled by corn, which makes bourbon.

It is the country's original whiskey that went into hibernation after prohibition.

The truth is that rye was the nation's strength before prohibition.

It is now making a comeback.

It was the nation's strength.

Mold of the nation.

-- milk of the nation.

Lex rye is in connecticut.

Field of rye.

You are a font of whiskey knowledge.

You were on the second season of the apprentice.

What did you learn from donald trump that you applied to whiskey pig?

The core lesson, if you have a great product, you have to be able to talk about it and convey it to the public.

In the case of whistle pig, it is the highest rated y -- rye ever in the country.

It has not been that much of a challenge.

Is there and -- less sugar?

The truth is all alcohol by content has the same amount of sugar.

As long as you do not put sugar into the drink, which there is nothing added, straight out of the barrel, straight rye whiskey.

In the lease -- individually selected from the best there'll's. what we're seeing is the resurgence of the american whiskey where it is competing successfully force cult -- scotch malts.

I feel so much like even our.

-- like even our and.

-- like ethan allen.

There is a connection here to whiskey pig.

Thank you so much.

We will be right back.

? good morning, everyone.

And has been a long winter.

February with all of the snow moving from atlanta through washington up to new york and then on to boston.

The show -- no is substantial.

The yellen testimony canceled.

Along with the rest of washington.

The white house days -- bathed in a beautiful snow.

Snowing through the day.

This is bloomberg surveillance.

Getting you company news now.

Starting with avon.

Advanced talks to settle a bribery investigation with the u.s. according to a person familiar with the matter.

Working to resolve criminal and civil probes into whether it paid bribes in china and other countries.

An agreement could be announced as early as today.

Cbs getting a boost from program deals.

Profit rose 28% to 400 $70 million.

They use the ratings dominance to increase the amount it charges pay-tv providers to retransmit or living.

The company boosted a stock buyback white -- by $1.5 billion.

Big boost for college dean.

An investment company investing as much as $100 million.

The popularity plunged last year after she admitted to using a racial slur.

The beginning of her comeback.

That is today's company news.

Top news affecting each and every american.

Philadelphia -- comcast buying time warner cable.

All stock, and that is a big deal for what it means for your cable bill.

Alec sherman up all night looking at the transaction.

When you see the announcement, what is different from 24 hours ago?

The one thing we know is there is no breakup fee issued with the deal.

That is important because charter has been delaying the hostile bid, charter has one last hope and may have been laying off of breakup fee if charter could make the case but time warner cable is taking on risk by doing up this -- by taking up this deal.

Now that we know there is no breakup fee, and chances are they will not be able to top this.

Is this a monopoly?

Hard to say.

They never competed and they still don't. on the other hand, comcast is a very large company that has a lot of leveraging power.

Regulators may be leery about the same really large company owning cable and programming.

Craig moffett widely followed media analyst has pointed out to us there is a possibility 3 million subscribers would effectively be purchased from comcast by charter communications.

Not necessarily left out in the cold.

That is not part of the official announcement yet.

Do we know where that stands?

They have said they would be willing to sell 3 million.

I know charter is interested in buying those.

I think it is probably likely at this point.

Still, a situation where john malone has been so publicly out there by wanting to consolidate the industry, we will have to see where his stance is.

He might be happy or my see that he was the one left on the outside.

We do not know where the 3 million 3 million subscribers are yet.

Possible comcast will get the valuable subscribers in l.a. in new york and charter with the smaller markets that may not be as valuable.

What will you work on today?

What is your number one point of analysis for this transaction?

It is really interesting the way this played out.

I want to find out more details on comcast and charter having side agreements at one point.

It seemed like charter was going to back the bid on this and then things fell apart last week when comcast made the decision to buy the entire thing on its own.

It has enough approval from regulators, but very interesting that these companies seem to of had a deal, and then it all fell apart and comcast went on its own.

That is very interesting.

Lex very interesting.

-- very interesting.

Comcast taking out time warner cable.

This is a long time.

David leibowitz, brand-new industry and now dominating our lives.

Dominating is a dominant theme.

Consolidation and airlines, cable.

Even in retail.

Or martin sorrell said about the overall gdp.

-- sir martin sorrell.

A data check with scarlet fu.

Retail sales numbers coming up this morning.

Jobless claims.

Futures down by 10.5 points.

10-year yield unchanged.

Good morning, everyone.

Bloomberg "surveillance." all of our interviews out at bloombergtv +, and bloomberg radio.

Scarlet fu and adam johnson with me.

We mentioned pepsico reported earnings earlier this hour.

Came in just above analyst estimates.

The company boosted the dividend and announced a $5 billion stock buyback row gram.

This is a challenge for pepsico.

Volume continues to fall.

North american volume last year sliding three percent.

Betty liu is with the cfo, hugh johnston.

You hit all the really big points coming out of the earnings release.

Thank you for joining us this morning.

Good morning.

As scarlet mentioned, you boosted your dividend by about 15%. you are buying back $5 billion more in shares.

Something analysts and investors watching today might say in this deal environment you have comcast buying time warner cable thomas brent after t-mobile.

Is there another place you could put your cash to work?

Are their acquisitions on the table for pepsico?

Let me talk a little bit about where we have been and lay out where we are going.

Really over the past couple of years we have spent a lot of time you balding the portfolio from a product and geographic perspective.

Right now we feel like we have our product and portfolio in a great spot.

In addition to that, we have been operating the business more efficiently and innovatively.

As a result, we are generating more cash.

As a result, we feel we have plenty of cash to invest in the organic growth of the business and in addition to that, to return more cash to shareholders.

Regarding shareholder acquisitions, we have been pretty consistent in saying all me pepsi acquisitions make sense right now, inspect that to be no more than 5 million per year.

We are very happy right now.

At the same time you mentioned in the release you will be continuing to look at $1 billion in savings every year over the next five years.

How much of the savings are going to come from job cuts and consolidation within the pepsico for folio?

Really the program we announced today, productivity program is an extension of the three alien dollar program that we have been on.

We have been evolving how we do that.

Really, we see opportunities because of previous investments we have made in capability and information systems to really make our supply chain more efficient.

As a result, we will see cost cuts opportunities across the board.

Labor will probably represent 40% of the overall number.

Just to be clear, job cuts, essentially staff reductions 40% of the $1 billion per year.

It will be about $40 billion in labor savings.

That will come from a variety of ways.

It will come from making the distribution system more efficient, it will come from outsourcing and doing shared services with some of the work we have been doing.

I would expect 40% to come from labor savings.

That said thomas we historically have been very effective in helping people who are displaced find opportunities elsewhere.

We have to leave it there.

Thank you for joining us.

Always great to see you.

The cfo of pepsico on earning state.

Thank you.

Betty liu with the pepsico cfo.

It is a very competitive business.

There have been challenges.

I know they have done better recently.

I just wonder i'm a what will they do to move out of the single digit growth?

That is why you have a lot of active investors in there.

Notice they will not split up the snacks division.

It is more than half the revenue.

They cannot split it up.

Lex if they took snacks away, they are nothing.

Then you will see real shrinkage.

Coming up, we want to show you the cover of the new business week out on shelves tomorrow.

A look at politics, equality, and fight for new minimum wage.

The president proposed $10.10 and signed an executive order to get it done.

It is only for federal contractors.

? good morning, everyone.

Coming up, jonathan running the worldwide shop at cnn and yuan and.

In the loop this morning.

8:00 a.m. look for that on bloomberg television.

This is bloomberg surveillance.

In this time for our morning movers.

Let's start with time warner cable.

A big deal we have been talking about.

And all morning rate at 45 billion big.

Comcast will be buying time warner cable in the steel.

This will create the largest pay-tv provider in the country with a market share of over 30%. a couple of the issues we are watching, number one, how will the boj respond to that?

Muffin it is and came out saying he expects 3 million subscribers will ultimately be in purchase by charter and that will help get this deal through.

This changes the landscape.

It is a huge transaction.

Look for reporting on that day.

Time warner cable goes up in the premarket, charter communications is down by 6.5% in the premarket.

Rotorhead made a bid for time warner cable.

The bid is insufficient, which is what enabled comcast to make a significantly higher bid.

Charter left out the quote.

They strung them along for three months.

Shares of whole foods down.

The company lowered its four- year forecast.

Increased competition, not just from other grocers, but whole foods new store.

You mentioned hopefully it is lowering prices to get more foot traffic meeting in.

We live in an amazon world.

The home shopping network, told me.

We have got to compete.

He has got to compete.

Here is another mover from last night.

In college basketball, top- ranked syracuse saving the best for last.

Four seconds left in the game.

Nailing a 35 foot shot at the buzzer for a win over pittsburgh.

Syracuse stayed undefeated and has one all 24 of its games this season.

The only that has not lost, guests which.

Wichita state.

Is syracuse -- he is 69 years old and he will forever be 49. there have only been seven and ca aa man with perfect records.

The last one you have got to go back to his 1976. the indiana hoosiers.

Bobby knight.

A young bobby knight.

If he was indeed the coach in 1976, that would be a young bobby knight.

Class i can only think of him in one way.

March madness is near.

Are they holding it in so she?

Speaking of weather, another snowstorm hitting the northeast.

We will look at the economic impact of those storms next on television and radio.

Good morning.

? this is "bloomberg surveillance." let's get you some company news now from the files of "bloomberg west." bonobo pointing to an end.

The losses will and within quarters after it completes the deal for the smartphone company.

It believes the turnaround will, as it reintroduces the motorola mobility brand to china.

Shares down four percent in company trade.

Sales could fall short of some analyst estimates.

They blame weakness in emerging markets and a slumping demand for telecommunications providers.

A new box for apple tv is now on the way.

The company is talking to time warner cable as well as other potential partners to add video content.

Apple hopes to introduce a device by april and have it ready to sell by the holidays.

That is the company news from the files of "bloomberg west." class a busy morning.

Government offices in washington in the storm are closed.

Things are looking brighter.

Maybe so.

The u.s. budget deficit diminishes.

Could we go to a surplus?

That is a major question in washington.

We have got the right kind of talk on this.

The former omb director and his wonderful book, creating a firestorm of debate in washington.

Wonderful to have you here.

Can we go to surplus and a better economy echo class there is not a snowballs chance that will happen.

Look at the forecast cbo put out yesterday.

A trillion of deficits over the next 10 years, we go back into trillion dollar deficits by 2018 or 19. that assumes there is never any recession again for the rest of time.

It assumes the economy accelerates 3.5% growth.

But with the recent improvements, can even david stockman be a bit optimistic?

Class i cannot possibly.

That is already built into a forecast.

The deficit ever drops below half $1 billion five, 6, 7 years into a business cycle recovery.

It goes south again.

$500 million is a massive -- it is a total defeat.

It is only a matter of the recent bias by which we think a mere half trillion dollar deficit is not a problem.

It was a problem seven years into a business cycle recovery, which is exactly what this forecast.

If you go back to the 60's, when they first came to town, -- you are brutal.

Wait a minute.

Even then, they believed only the cycle you should bounce the budget, and when the economy got way into full employment what happened to even means?

Why have we become so accepting of deficits?

Because the fed has enabled it.

We now have 17 trillion national debt.

The cost on that is about 250 a year unless or about the same as it was in 206 when our national debt was six or seven jillion dollars.

What they have done is driven the interest rates down to the rock bottom.

They have taught washington the deficit -- a benefit for the secretary of treasury, certainly.

It has.

But i have spent time down there and i was there in the 1970's when we had double digits.

The only thing that will cause condor -- congress to act is fear.

When interest rates are at rock bottom, there is no fear.

Spoke to charlie rose about the u.s. economy and why the u.s. will not be able to pull it ahead and here's what he said.

The u.s. cannot grow at a rate fast enough to pull the whole world along.

The difference between three percent and three point five percent makes a world of difference in the united states, but not enough to make up for losing one percent in europe or china or japan.

You have to look at major parts of the world economy and say, what could they do to grow more?

We have been clear in europe, we think countries that have surpluses could do more to stimulate growth and demand.

Europe needs to man.

The world needs more demand.

The full interview with the treasury secretary, see it this evening on bloomberg television.

David, you hear the secretary with the company line, you have got to give democrats credit.

Why do budgets narrow with democrats and not republicans?

This is an accident of timing.

What you just heard was clueless ritual incantation.

The world economy has gotten dangerous time bombs planted everywhere as a result of zero interest rates in the money markets.

I will quiz you on this.

How do you explain three and four percent gdp growth at the end of 2013? vectors all moving in the right direction.

A peaceful transformation from bernanke to yellen.

I understand long-term fears, but the recent thing has been very optimistic.

I do not think so at all.

Most of that was inventory accumulation.

If you look at final sales in the fourth quarter, 1.9% over prior year.

Final sales in the last quarter of 2012, 2 .5% over prior year.

We have not accelerated all of this short-term inventory.

I have got a

This text has been automatically generated. It may not be 100% accurate.

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