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Comcast Calls Off Time Warner Cable Merger - Broadcasting & Cable

Comcast Calls Off Time Warner Cable Merger

Updated: Deals with Charter also terminated
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Related: Comcast/TWC Merger Demise Called 'Huge' For Consumers, Internet

Comcast Corp. said Friday morning that its merger agreement with Time Warner Cable has been terminated.

The cable company also said that its deal to sell systems to Charter Communications has been terminated.

The deals ran into resistance during review by government regulators.

"Today, we move on. Of course, we would have liked to bring our great products to new cities, but we structured this deal so that if the government didn't agree, we could walk away," said Comcast CEO Brian Roberts in a statement.

"Comcast NBCUniversal is a unique company with strong momentum. Throughout this entire process, our employees have kept their eye on the ball and we have had fantastic operating results. I want to thank them and the employees of Time Warner Cable for their tireless efforts," Roberts added. "I couldn't be more proud of this company and I am truly excited for what's next."

The merger would have made Comcast the dominant player in the cable TV and broadband markets.

After over a year of public interest promises and ads suggesting the two companies were better together, Comcast was ultimately unable to convince Washington that bigger was better.

By almost all accounts the combined broadband sub count, some deal critic estimates were as high as 50% of high speed subs, was a big factor in the FCC's conclusion that the deal should not go through.

With Comcast out of the picture, analysts think that Time Warner Cable remains in play.

"We believe that TWC will get a bid from Charter in the next 3 months, which we expect to be lower than the market expects," said Needham & Co. analyst Laura Martin. "We expect Charters opening bid to be $130-$135 per TWC share (down 12%), similar to its bid in 1Q14 before Comcast entered the picture. "

Martin said that while Charter's share price has risen since a year ago, she expects Charter to favor the lower bid price because there are now no competing bidders, more regulatory risks than before, and because Charter has more negotiating leverage now that it has agreed to pay $10 billion for Bright House.

"We foresee no bidders for Time Warner Cable other than Charter, although we expect TWC to look for others," Martin added. "Any company that considers buying Time Warner Cable must carefully consider whether they can get it through the regulatory approvals, which adds risks to closing. No bidding war lowers the price TWC can be purchased for."

If Time Warner Cable decides not to sell, Martin sees its share price falling to the $130-$135 level because there are few cost synergies to be funded in the stand-alone company. "If there is no other optionality for private market value in the near term, investors will adjust the upside vs downside equation lower."

It was clear that the ISP gatekeeper label placed on ISPs by FCC chairman Tom Wheeler, and driving the Obama Administration's backing of Title II common carrier status on those providers, extended to the Justice Department.

DOJ was taking credit for putting the kibosh on the Comcast deal, announcing Friday that Comcast had dropped its Time Warner Cable bid after the Department of Justice informed the companies that it had significant concerns that the merger would make Comcast an unavoidable gatekeeper for Internet-based services that rely on a broadband connection to reach consumers.

“The companies' decision to abandon this deal is the best outcome for American consumers,” said attorney general Eric Holder in a statement. “The Antitrust Division of the United States Department of Justice has demonstrated, time and again, that it can and will defend the interests of the American consumer no matter the complexity of the issue or the size of the opponent.  This is a victory not only for the Department of Justice, but also for providers of content and streaming services who work to bring innovative products to consumers across America and around the world.  I commend the Antitrust attorneys and investigators whose outstanding work led to this outcome, and I know that the Department of Justice will continue to fight for fair access and free competition in every industry and every market.”

Holder did give the FCC some credit for their "close and productive cooperation throughout this investigation."

For his part, FCC chairman Tom Wheeler suggested that the country was better off with Comcast and Time Warner Cable not together.

"Comcast and Time Warner Cable’s decision to end Comcast’s proposed acquisition of Time Warner Cable is in the best interests of consumers," he said. "The proposed transaction would have created a company with the most broadband and the video subscribers (SIC) in the nation alongside the ownership of significant programming interests."

"Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation, including to the ability of online video providers to reach and serve consumers."

Deal critics, who had already started a victory dance Thursday on signals the merger was dead, continued after it became official.

"Today’s news that Comcast has ended its effort to create Mega Comcast through the acquisition of Time Warner Cable is a tremendous victory for consumers, competition and innovation," said the Stop Mega Comcast Coalition. "This outcome is the direct result of the efforts of hundreds of thousands of citizens, Members of Congress, community leaders nationwide, as well as dozens of businesses and organizations who have advocated tirelessly in defense of a competitive media marketplace. The FCC and DOJ are to be commended for conducting a fair, fact-based review process that has upheld the law and served the interests of the public.”

Public Knowledge called it a "huge victory" for consumers. "If Comcast had bought Time Warner Cable, it would have been able to stop new kinds of innovative video services dead in their tracks," said Public Knowledge staff attorney John Bergmayer. "Instead, the Federal Communications Commission and Department of Justice have decided to allow competition to work. New online video services shouldn’t have to ask Comcast for permission to reach viewers or access content. The efforts by the FCC and DoJ in reviewing this deal set a new high bar for the Obama administration in antitrust and public interest review."

The NTCA, as in National Cable & Telecommunications Association, of which Comcast is the largest member, had no comment, but the NTCA, as in NTCA–The Rural Broadband Association, definitely did.

“The announcement that Comcast and Time Warner Cable have abandoned their bid to combine forces is a victory for American consumers as well as the broadband solution providers represented by NTCA–The Rural Broadband Association," the group said. "The FCC and the Department of Justice heard our concerns and signaled that they remain committed to promoting competition and innovation in the video and broadband marketplaces. NTCA looks forward to working with both agencies to ensure that rural providers continue to have the opportunity to compete and offer high-quality broadband and video services to their subscribers.”

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