Comcast to call off $45BN Time Warner mega-merger

DetailsMichelle Clancy | 24 April 2015

Comcast is planning to call off its $45 billion merger with Time Warner Cable.

According to a Bloomberg TV report, the deal is all but dead, sources said, and a formal announcement could come as early as Friday.

The move comes following a recommendation by the Federal Communications Commission that the merger be referred to hearing by an administrative law judge, and widespread speculation that it may not make it past regulatory scrutiny.

The combined company would have served between 30 and 33 million households, that is a third of the American public a state of affairs that Comcast said would create "appropriate scale" to enable increased investment in innovation and new services. Critics have characterised it differently.

"If Comcast takes over Time Warner Cable, it would wield unprecedented gatekeeper power in several important markets," noted Public Knowledge.

The combined company would also have outsized influence when it comes to negotiating network peering arrangements, especially in light of online video traffic, so it would affect the cost of carrying that traffic for others, certainly a competitive advantage.

"An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content," Free Press added.

The rumour of the deal's demise has been welcomed in many corners. "I've been opposed to this deal since it was first announced," Minnesota Senator Al Franken said in a statement in the Bloomberg report. "This transaction would create a telecom behemoth that would lead to higher prices, fewer choices, and even worse service. We need more competition in this space, not less. If reports of the collapse of the deal are true, it would be a huge victory for American consumers."

The move also leaves TWC and Charter Communications in limbo. Bloomberg said that TWC execs were planning a shareholder update to describe how the company would go forward as a standalone entity.

As for Charter, it had agreed to a complex deal with TWC and Comcast that would see Comcast divesting a net 3.9 million video customers to it, bringing the combined company's post-merger managed subscriber total to less than 30% of video subs in the US. It also would have made Charter the nation's second largest cable operator in the United States (up from No 4 today), with 5.7 million video subscribers.

In addition, Charter, through a tax-free reorganisation, will form a new holding company (New Charter) that will own 100% of Charter, and it will acquire an approximate 33% stake in a new publicly-traded cable provider to be spun-off by Comcast serving approximately 2.5 million customers, dubbed SpinCo. And, Charter will provide management services to the new company.

The financial terms were not disclosed, but the Financial Times put an estimate of $20 billion on the plan.

Before the deal with Comcast was announced in February 2014, TWC was in talks to merge with Charter. Those talks could now be re-fired.