“Today, we move on,” Comcast chairman-CEO Brian Roberts said in a statement Friday. “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.
“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. I couldn’t be more proud of this company and I am truly excited for what’s next.”
Comcast’s decision came after meetings with officials from the FCC and Justice Department. It was clear that the transaction would not have received federal approval without fundamental changes. Those changes are said to have included a proposal from the feds that it spin off NBCUniversal into a separate company — an option that was a non-starter for Comcast execs, sources said.
“Comcast and Time Warner Cable’s decision to end Comcast’s proposed acquisition of Time Warner Cable is in the best interests of consumers. The proposed transaction would have created a company with the most broadband and the video subscribers in the nation alongside the ownership of significant programming interests,” FCC chairman Tom Wheeler said in a statement. “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.”
Comcast’s retreat on Time Warner Cable will have ripple effects across the landscape of cable and broadband providers.
Charter Communications had struck a complicated agreement with Comcast to acquire 3.9 million subscribers as a result of divestitures that Comcast and Time Warner Cable planned in order to make the deal more palatable to regulators. Charter cut the deal as a consolation prize after being outmaneuvered in the bidding for TW Cable in early 2014.
More recently, Charter struck another cable acquisition deal, for Bright House Networks, that was contingent on Comcast and TW Cable tying the knot. Bright House has long been managed by TW Cable, an arrangement that would have ended if the Comcast deal had closed.
Wall Street analysts say Charter, in which cable mogul John Malone has a 25% interest, will be in a stronger position to make another run at TW Cable because its stock price is up and operations have strengthened. TW Cable resisted the unsolicited bid that Charter launched in mid-2013, calling it “grossly inadequate.”
According to MoffettNathanson analyst Craig Moffett, Charter’s offer to acquire TW Cable for $82.54 a share in cash and stock would now be valued at around $151 per share. Comcast was to have paid nearly $159 per share for TW Cable. Charter declined comment on Thursday after the news broke of Comcast’s decision to back out of the TW Cable deal.
Other sizable cable operators, including Cablevision and Cox Cable, are still seen as in play at a time when the playing field for television and broadband providers is experiencing tectonic shifts. It’s no coincidence that the Comcast-TW Cable deal faced regulatory opposition at the FCC and Justice Department in the wake of the FCC’s decision on net neutrality rules that extend its authority to police broadband services. In the end, the union of Comcast and TW Cable was scuttled out of fear that the enlarged company would have too much sway over the pipes that allow millions of Americans access the Internet — a service that has become a household utility in the past few years.
There was speculation that TW Cable could try to bolster its operations by going after Cablevision, whose 3 million subscribers on Long Island would complement TW Cable’s stronghold in New York City. Or Charter could be a contender for Cablevision. There was also speculation that Comcast would go in the other direction and try to bulk up by scooping up a wireless player a la T Mobile.
In an appearance on CNBC Friday morning, just after confirming the termination of the merger agreement, Roberts emphasized that Comcast has plenty of growth options without TW Cable in the fold. “We move forward from here and there’s no looking back,” Roberts told CNBC.
In a research note on Thursday, Moffett said the immediate future is “clear as mud” for Comcast and others. And he agreed with Roberts that TW Cable was not a make-or-break deal for Comcast.
“There are, in short, a bewildering number of branches of the decision tree,” Moffett wrote. “There are so many branches of the tree, each with different prices to be paid and dilution to be calculated that simply suggesting that Charter should be a winner if indeed they have the playing field to themselves is too simplistic. Comcast doesn’t appear to have much downside, particularly if they announce a buyback, but they also lose some upside. And certainly some ‘sizzle.’ And we think Cablevision remains the odd man out.”
With Comcast-TW Cable out of the picture, the focus for regulators turns to reviewing the pending $48 billion merger of AT&T and satcaster DirecTV.
Pictured: Comcast chairman-CEO Brian Roberts