Comcast Corp. dropped its $45.2 billion deal to buy Time Warner Cable Inc., officially pulling the plug after concluding the merger would be rejected by regulators.
Comcast announced its decision Friday in a statement after a meeting of its board the night before. U.S. Justice Department and Federal Communications Commission objections made it clear the deal was dead.
“Today, we move on,” Comcast Chief Executive Officer Brian Roberts said in the 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.”
The collapse is a major setback for Roberts and will set off a cascade of recalculations in the businesses of broadband Internet and delivery of television and movies. Comcast must regroup to focus on adding more Internet subscribers and defending its pay-TV business, while Time Warner Cable could pursue other possible partners, such as John Malone’s Charter Communications Inc.
“It’s the end of one chapter but the beginning of another,” said Craig Moffett, an analyst at MoffettNathanson. “The pace of cable consolidation is likely to accelerate rather than decelerate. It’ll just be Charter rather than Comcast leading the charge.”
Comcast also said in the statement that it terminated its agreement with Charter Communications. The largest U.S. cable provider, Comcast faced scrutiny in Washington over whether it complied with agreements made in its 2011 acquisition of NBCUniversal.
The decision to drop the merger “is in the best interest of consumers,” FCC Chairman Tom Wheeler said in an e-mailed statement. “Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation, including to the ability of online video providers to reach and serve consumers.”
The Justice Department had been reviewing whether Comcast was too actively involved when co-investors 21st Century Fox Inc. and Walt Disney Co. tried to sell Hulu in 2013, people familiar with the matter said earlier. Comcast agreed to be a passive investor in Hulu when it acquired a stake in the company through the NBCUniversal purchase.
“This is a victory not only for the Department of Justice, but also for providers of content and streaming services,” Attorney General Eric Holder said in an e-mailed statement. The deal’s collapse “is the best outcome for American consumers,” he said.
On Wednesday, FCC staff joined lawyers at the Justice Department opposing the transaction. That day, FCC officials told representatives of the two companies they are leaning toward concluding the merger doesn’t help consumers, a person with knowledge of the matter said.
The FCC’s plan to call a hearing effectively killed the deal’s chance of success. An FCC hearing can take months to complete and drag out the approval process beyond the companies’ time frame for completion.
Bloomberg News reported last week that Justice Department staff was leaning against the deal. Senators including Al Franken, a Democrat from Minnesota, also voiced opposition.
“Comcast’s withdrawal of its proposed merger with Time Warner Cable would be spectacularly good news for consumers,” Michael Copps, a Democratic former FCC commissioner working with Common Cause to oppose the deal, said in a statement.
Comcast shares were little changed at $59.22 at 9:58 a.m. in New York trading. Time Warner Cable gained 3 percent to $153.22.
“We are strong and getting stronger,” Time Warner Cable CEO Rob Marcus said in a statement after the termination announcement. “We are confident we will continue to create significant value for shareholders.”
As recently as Tuesday, Comcast lobbyists were making a last-ditch effort to save the deal, which would have created a cable and Internet juggernaut serving 57 percent of U.S. homes that receive broadband at speeds that meet the FCC standard set in January. After meeting with FCC officials, Comcast and Time Warner Cable were left with little hope, said one of the people.
FCC staff concluded that an extended hearing was required in part because of the complexity of the issues raised by the deal, according to a person close to the agency. The hearing would have given all sides an opportunity to weigh in on the deal’s impact on issues like innovation, the rise of Internet-based video, cable-TV pricing and bundling of channels.
The collapse leaves Time Warner Cable in limbo. Executives at the New York-based company plan to use an earnings call next Thursday to brief their shareholders, a person with knowledge of the matter said Thursday.
Before the deal with Comcast was announced in February 2014, Time Warner Cable was in talks to merge with smaller Charter Communications, whose largest investor is billionaire Malone.
In the short term, the deal’s collapse means Charter, which agreed to take control of 3.9 million Comcast cable-TV subscribers, won’t get those customers. Another Charter deal, the recent agreement to purchase of Bright House Networks, could also be in jeopardy, because Time Warner Cable has the right to block it as part of its long-time arrangement to negotiate programming and other deals for Bright House.