Comcast has abandoned its planned US$45bn takeover of rival Time Warner Cable (TWC), which would have combined the US’ two largest cable and broadband providers. Analysts have said Comcast may now turn its attention overseas. As widely anticipated,…
Comcast has abandoned its planned US$45bn takeover of rival Time Warner Cable (TWC), which would have combined the US’ two largest cable and broadband providers. Analysts have said Comcast may now turn its attention overseas.
As widely anticipated, Comcast announced today that both its merger agreement with TWC and its transactions agreement with Charter Communications have been terminated.
The announcement comes after the Federal Communications Commission (FCC) and Department of Justice (DoJ) informed the cablecos that they had serious concerns that the merger risks outweighed the benefits to the public interest.
In a separate FCC statement, chairman Tom Wheeler described the companies’ decision to scrap the deal as “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.”
He added that the planned merger would have posed an “unacceptable” risk to competition and innovation, particularly given the growing importance of high-speed broadband to online news and video services.
Meanwhile, the antitrust division of the DoJ said in its own statement that it had significant concerns that the merger would make Comcast “an unavoidable gatekeeper for internet-based services that rely on a broadband connection to reach consumers”.
Attorney General Eric Holder described the termination of the deal as “a victory not only for the DoJ but also for providers of content and streaming services who work to bring innovative products to consumers across America and around the world”.
Comcast CEO Brian Roberts commented: “Today we move on. 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.”
There has already been considerable speculation among analysts about which companies Comcast could target next. Content companies including Time Warner, Lionsgate and Netflix, cellco T-Mobile US and, overseas, Liberty Global andVodafone have all been named as potential targets.
Wells Fargo analysts, however, do not believe Comcast will pursue another takeover.
“In our view, there is a 0% chance that Comcast goes in front of the regulators (especially in this Democratic environment) with any deal of size …”
Instead, they predict Comcast will opt for a “pretty big” share buyback.
MoffettNathanson analysts also expect Comcast to announce a share buyback which, in their view, would equal the one they had promised if the deal closed.
In their view, Comcast’s M&A options in the US are now very limited. The analysts do not think it would ask the FCC and DoJ for permission to do a smaller deal or “take the table scraps” from a TWC deal. They also believe a bid for T-Mobile US is likely to be viewed in Washington as “overly provocative” and that such a move would essentially lend weight to the argument that “wireless broadband is the last bet hope for competition to wired”. If Comcast does turn its attention overseas, they think it would at least consider Liberty Global, although, as they see it, Vodafone arguably has even more need for that asset.
As part of the proposed remedies for the Comcast-TWC merger, Charter Communications, beaten to the TWC acquisition by Comcast, had agreed to buy 3.9 million subscribers set to be divested by Comcast and TWC. However, as it was contingent on the initial transaction, this deal has now also collapsed.
