13 December 2018

Comcast Kills Time Warner Cable Deal

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Comcast Corp. on Friday ended its plans to acquire Time Warner Cable Inc., as increasing pressure from regulators prompted the end of the $45.2 billion deal. In a separate release, Time Warner Cable Chief Executive Robert D. Marcus said his company remains strong. Regulators applauded the deal’s demise. Attorney General Eric Holder said the decision was “the best outcome for American consumers,” and Federal Communications Commission Chairman Tom Wheeler called it “in the best interests of consumers.”

The Comcast-Time Warner Cable deal had promised to reshape the media landscape—forcing TV channel-owners and other pay-TV operators to contemplate their own mergers. As a result of the deal falling apart, companies across the industry will have to reassess their calculations. The deal’s end will raise the prospect of another suitor going after Time Warner Cable. Charter Communications Inc., which had pursued Time Warner Cable before it was snapped up by Comcast, remains interested in the company, people familiar with the situation said. Charter has been in contact with banks about a debt package in recent weeks.

Comcast this week sought to make last ditch efforts to save the deal. On Monday, Comcast CEO Brian Roberts spoke to Mr. Wheeler to try to persuade him of the benefits for consumers. On Wednesday and Thursday, Comcast officials met with FCC staff and were told in no uncertain terms that no matter what the company offered in terms of concessions, the deal was headed for trouble, one person close to the companies said. “They wanted to kill it.”

Though Comcast could have fought to preserve the deal, the drawn-out process may not have been worth it, which is why such a hearing is known by regulatory experts as a deal killer. Agency staffers said a hearing could take up to two years. Regulators worried about the power Comcast would amass through the deal, with roughly 30% of the U.S. pay-TV market and 57% of the broadband market, which the FCC now defines as speeds of 25 megabits per second and higher. The agencies’ biggest concerns came down to how they could protect the nascent streaming TV industry against the broadband colossus the deal would create, people familiar with the meetings between Comcast and the regulators said.

The Justice Department stepped up its own review in recent weeks, asking media companies that opposed the deal for examples of how Comcast may have abused its market power. The government also was skeptical of whether some of the restrictions it put on Comcast while approving its acquisition of NBCUniversal had worked as intended, people familiar with the matter have said.

A breakup scrambles two deals Charter had in the works. Comcast had a deal with Charter to sell or spin off about 4 million subscribers that Comcast and Time Warner Cable planned to divest in their combination. Plus, Charter had agreed just last month to buy cable operator Bright House Networks LLC for $10 billion. That transaction was contingent on the Comcast-Time Warner Cable deal closing.

With the bid for Time Warner Cable over, Comcast could be in a position to do another major deal to seek out further growth. It could go hunting overseas for cable operators or TV channel-owners, as some of its peers in the media industry have done, or make a push into the wireless business. Comcast has in the past several years looked at various international assets but hasn’t been convinced to pursue any target, a person familiar with the matter said.

Time Warner Cable believes its assets are more valuable today than they were a year ago thanks to better operating by management, a person familiar with the company’s thinking said. With its strong balance sheet, TWC could be an acquirer in its own right should the deal fall apart, one person said. Time Warner Cable has a roughly $42 billion market capitalization

While Comcast’s bid for Time Warner Cable was one rationale for media companies to consider getting bigger through mergers, it wasn’t the only one. Media executives say there are still reasons for TV-channel owners to combine. As distributors look to cut costs amid cord-cutting, smaller and midtier channels face the prospects of lower carriage fees—or even being dropped altogether.

Click here to access the full article on The Wall Street Journal. 

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