BY Richard Summerfield
It was supposed to close at the end of 2014, and was the key cog in the rapidly consolidating US television market, yet the $45bn merger between telecommunications giants Time Warner Cable and Comcast was cancelled in late April, citing rapidly mounting regulatory concerns.
The deal, originally announced in February 2014, would have formed a cable and broadband juggernaut, combining the two largest US companies in the space. The merged entity would have controlled 57 percent of the US broadband market and just under 30 percent of pay television service. Accordingly, from the outset there was speculation that the deal would attract the attention of antitrust authorities in the US.
Publicly, both firms were confident that the deal would go ahead, and gave assurances that competition in the US would remain largely unaffected. Comcast argued that the companies served different enough markets that customers would not notice a drop in competition. The firm also agreed to spin off some Time Warner Cable subscribers to keep its share of the US cable TV market below 30 percent.
Yet despite Comcast’s protestations, the longer the deal dragged on, the louder the voices of dissent became. A month following the announcement of the transaction, the Department of Justice launched an investigation into the deal. The proposed merger also attracted the ire of a number of politicians and consumer groups. By mid April, both the Justice Department and the Federal Communications Commission indicated that they would move to block the deal should Comcast continue to pursue the transaction. In light of the mounting regulatory opposition, Comcast decided to walk away. "Today, we move on," noted Brian Roberts, Comcast's chief executive, in a statement. "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."
Following the withdrawal of the bid, FCC chair Tom Wheeler said the deal would have threatened the emerging ‘over the top’ and streaming services which are changing the nature of consumers’ interaction with media and entertainment. Mr Wheeler stated that "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 video subscribers in the nation alongside the ownership of significant programming interests.”
The collapse of the deal will have an impact on the wider communications sector. Regional cable operator Charter Communications Inc was due to acquire a number of Time Warner Cable markets which Comcast was planning to divest following the closure. Charter also has a $10.4bn deal for Bright House Networks in place which was reliant on the completion of the Comcast deal. Whether those deals go ahead now remains to be seen, however Time Warner is believed to be open to a potential merger with Charter, two years after the smaller firm launched an unsolicited and acrimonious $37.3bn bid for Time Warner.