WASHINGTON, April 23 (UPI) -- The nation's largest cable company, Comcast, announced Friday it will end its $45 billion plan to acquire the nation's second-largest cable company, Time Warner, after meeting Wednesday with the Department of Justice to iron out the details.
"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," said Comcast Chief Executive Brian Roberts in a statement.
Philadelphia-based Comcast announced the plan 14 months ago but the acquisition has proceeded so slowly and is lined with so many obstacles that executives decided to abandon the idea.
The primary reason for the dropout, sources indicated, is what might be insurmountable concern among federal regulators that the merger would produce a company so powerful that it would stifle competition and negatively impact subscribers.
Comcast has reportedly spent about $300 million so far in the acquisition process.
The hearing designation order recommended by the Federal Communications Commission was a near certain signal, analysts say, that the regulatory agency was disapproving of the merger.
A hearing designation order is a move to have the acquisition reviewed by an administrative judge. Such orders are rarely seen in business regulation, and when they are seen they typically don't bode well for mergers. AT&T abandoned its $39 billion acquisition of T-Mobile in 2011 as the FCC was preparing to issue a hearing designation order.
Comcast's primary reason for the acquisition was the company's reported desire to absorb Time Warner's subscribers in major U.S. markets, which would have boosted its number of TV and broadband customers to about 30 million. It also would have controlled 57 percent of the broadband market in the United States.
The withdrawn plan is a setback for Comcast but it won't cost the company a dime. A stipulation in the deal crafted last year means Comcast doesn't have to pay Time Warner anything for walking away from the deal.
The failure to reach a deal forces other pay television owners and television channel owners to reassess their own plans. Comcast will likely use money not spent on the merger to buy additional content-related companies, and another large-scale cable company, such as Charter Communications Inc., may go after Time Warner. The Wall Street Journal reported Friday that sources familiar with the situation have said Charter has contacted banks recently about arranging a debt package to buy Time Warner.
Justice officials, who are responsible for ensuring the merger doesn't violate antitrust laws, met with the cable representatives Wednesday as the agency prepared to make its final decision as to whether the merger should be allowed or not.
The Federal Communications Commission, which had also been reviewing the proposed merger, was tasked with determining if the deal was in the public's best interest. Last week, Bloomberg reported that the Justice Department was leaning against the merger. Wednesday's meeting was seen by some analysts as an attempt by Comcast to assuage federal regulators' concern.
A group of six U.S. senators also publicly rallied against the deal this week, sending a letter to Justice chief Eric Holder and FCC Chairman Tom Wheeler. And they weren't the deal's only critics.
"Many people said this deal was a slam-dunk," Delara Derakhshani, counsel for a consumer advocacy union, said. "But they didn't anticipate the huge response from consumers. Nearly one million consumers wrote in to regulators to express their concerns about the deal."
Forbes writer Antoine Gara, however, wrote Thursday that the collapsed deal might actually hurt consumers who see the failure as a victory.
Exactly what was discussed or agreed upon in Wednesday's meeting was not revealed, but some analysts speculate that Justice officials painted a particularly bleak portrait of the merger that led Comcast to abandon hope that it could ever be approved.
The pullout leaves Time Warner to grapple with previous troublesome issues, such as ownership. The Los Angeles Times reported the failure may also negatively impact fans of the Los Angeles Dodgers baseball team, who hoped the merger would finally allow them to watch games on television -- an impasse Time Warner has not yet resolved.
Comcast, although badly stung by such a failure, is expected to continue being profitable and could possibly consider a different acquisition as some point in the future.
"Comcast has a very strong collection of assets and operating momentum. They will return to their knitting and still be successful," Moffett said.