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UPDATE 3-Comcast, Verizon approached Twenty-First Century Fox to buy some assets -sources

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By Anjali Athavaley and Liana B. Baker

Nov 16 (Reuters) - Comcast Corp and Verizon Communications Inc have both expressed interest in acquiring a significant part of Twenty-First Century Fox Inc's assets, two people familiar with the situation told Reuters on Thursday.

News of their interest broke even as the Justice Department was, according to a source, preparing a lawsuit to block AT&T Inc , the largest pay-TV provider in the United States, from buying Time Warner Inc for $85.4 billion. This raised questions about the U.S. government's willingness to allow large media deals. The Fox assets of interest include Fox's movie and TV production studios, cable networks FX and National Geographic and international assets such as the Star network in India and European pay TV provider Sky Plc . These assets have also been the subject of recent talks between Fox and Walt Disney Co , one of the sources said. Fox shares jumped nearly 8 percent in after-hours trading. Shares of Viacom Inc and CBS Corp also rose more than 2 percent, a sign investors may see then as potential targets.

Comcast has approached Fox about its interest, and talks are in early stages, the source added, asking not to be named because the matter is private. There is no guarantee that talks between the companies will result in a deal.

Fox, Comcast and Verizon declined comment.

The assets would give Comcast, the largest cable provider in the United States which bought NBCUniversal in 2011, an international distribution footprint through ownership of Sky and Star in India.

Comcast has steadily boosted its ownership of content over the years. Acquiring Fox's assets would further position itself as a diversified conglomerate to rival Disney, analysts said.

The deal would also bulk up its NBCUniversal unit, which acquired Dreamworks Animation for $3.8 billion last year, as well as increase its ownership stake in video streaming service Hulu.

Verizon is also in the early stages of exploring a deal, one of the sources said. A deal could give the U.S. No. 1 wireless carrier ownership of movies and TV shows to stream to its mobile subscribers.

Acquisition of a movie studio and cable channels would be a departure for Verizon, which has focused its media deals around advertising technology and Internet properties.

It spent $4.48 billion acquiring the core business of Yahoo, which it merged with AOL this year to form a venture called Oath. Oath, led by AOL CEO Tim Armstrong, owns more than 50 brands including HuffPost, TechCrunch and Tumblr.

Industry analysts have questioned whether the company needs to acquire more content when its rivals in the wireless industry are bundling it with mobile service.

Roger Entner, an analyst of Recon Analytics, said, "It is undeniable that there is a trend of combining content with distribution."

The Fox assets are a valuable property that would help Verizon, he said.


(Additional reporting by David Shepardson and Diane Bartz in Washington, Jessica Toonkel in New York and Yashaswini Swamynathan in Bengalaru; Editing by Bill Rigby and Cynthia Osterman)

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