Comcast officially withdrew its $45bn offer for Time Warner Cable as the US justice department suggested it would have blocked the combination and hailed the failure of the deal as a victory for innovative content providers and streaming video services.
Campaigners who had opposed the combination of America’s two largest cable and broadband providers from the start greeted its collapse as a sign of increasing support for an open internet in Washington.
“The demise of this merger, alongside the net neutrality victory from earlier this year, mark the rise of internet users as a powerful political constituency that can no longer be ignored by elected officials and policy makers,” said Craig Aaron, chief executive of the lobby group Free Press.
Regulators’ opposition supported the proposition that they had focused more on rapidly evolving digital technologies than on the cable video market.
The mooted Comcast-TWC deal “would have posed an unacceptable risk to competition and innovation, including to the ability of online video providers to reach and serve consumers,” said Tom Wheeler, chairman of the Federal Communications Commission.
The DOJ similarly cited “significant concerns” that the tie-up would have made Comcast “an unavoidable gatekeeper for internet-based services that rely on a broadband connection to reach consumers”.
Brian Roberts, Comcast’s chief executive, said in a statement that the company would “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,” he said.
Neither company will have to pay a “break fee” following the deal’s collapse. But at least 11 banks worked on the deal and related transactions and stand to miss out on up to $325m in fees, according to estimates from Freeman & Co, the consulting group.
This includes fees associated with the likely collapse of Comcast and TWC’s agreement to sell 3.9m subscribers to Charter Communications, the John Malone-backed cable operator, and Charter’s $10.4bn proposed purchase of Bright House Networks.
TWC executives will also miss out on a hefty windfall. Rob Marcus, TWC’s chief executive, was in line to receive $79.9m in cash, equity and benefits if the deal had completed — despite only being appointed to the job two months before Comcast submitted its offer.
Arthur Minson, TWC’s chief financial officer, had been set for a severance package worth an estimated $27m.
Comcast’s next move is unclear but the company, which owns NBCUniversal, is likely to look for other deals, said Amy Yong, a Macquarie Securities analyst.
Its options “could include expanding its footprint overseas, increasing its presence in media to boost NBCUniversal, or moving into the wireless business,” she said.
Analysts and bankers expect Charter to make a renewed approach to TWC, which it had bid for last year before Comcast entered the picture.
A combined Charter-TWC may then look to buy another company such as Cablevision, controlled by New York’s Dolan family. “Charter-Time Warner Cable is the most logical long-term buyer” for the 3m-subscriber company, said Ms Yong.
The failure of the Comcast-TWC deal will not dent cable consolidation for long, said Susan Crawford, co-director of the Berkman Centre for Internet and Society at Harvard University.
“There will be more efforts in the cable industry to further consolidate but that’s not good for the country,” she said. “Operators face neither competition nor real oversight so they can essentially extract a private tax from all high-capacity uses of their networks.”
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