Comcast is dropping its $45 billion bid to merge with Time Warner Cable, amid reports that federal regulators are poised to block the deal, according to Bloomberg News.
Bloomberg reports that Comcast is backing out of the merger deal reached in February 2014. Comcast declined comment.
In recent days Wall Street analysts have been increasingly pessimistic over the prospects that the deal would get the greenlight in a tough regulatory environment. After Comcast met with officials of the Justice Department and the FCC on Wednesday came reports that the FCC staff was opposed to the deal and prepared to recommend that it be reviewed before an administrative law judge. Such a scenario would drag out the review process for months if not years.
Craig Moffett wrote of the merger on his blog on Thursday: “No, the Comcast deal isn’t dead yet. But it’s a bit like an elephant that has been dropped out of an airplane. But it is falling fast, there’s not much you can do to stop it, and its odds of survival are pretty low when it hits the ground.”
In fact, analysts have begun to speculate about what is next for Time Warner Cable, whether it be combining with Bright House Networks or Charter Communications.
Opponents and critics of the merger, which included Netflix, Dish Network and Discovery Communications, had argued that Comcast would gain too much control over the video marketplace and would be able to exercise some power over the growth of Internet video.
The merger, first announced in February 2014, would have combined the largest and second largest cable providers to take just under 30% of the multichannel video market. But opponents increasingly focused their attention on Comcast’s share of the broadband market, which the company estimated at between 35% to 40% were the two entities to merge.
A key draw for Comcast was the ability to gain a foothold in New York and Los Angeles, where Time Warner Cable has dominance.
Yet just in the past few months, it has become clear that the FCC, under chairman Tom Wheeler, was much more skeptical of the health of the competition in the video market. In January, the FCC voted 3-2 to change the standard baseline for broadband service to 25 mbps from 4 mbps. At that level, Comcast would control 57% of the market after the merger.
If the merger falls through, Comcast will bear no breakup fees, as those were not written into the agreement with Time Warner Cable.