Reports surfaced from Bloomberg over the weekend that the US Department of Justice is looking for a way to put a halt to Comcast's plans to acquire Time Warner Cable. (See DoJ May Sue to Block Comcast-TWC Merger.)
The Wall Street Journal also chimed in, reporting that Comcast Corp. (Nasdaq: CMCSA, CMCSK) is scheduled to meet with the DoJ on Wednesday to discuss possible conditions for merger approval. However, according to the WSJ, both the Justice Department and the Federal Communications Commission (FCC) have major concerns about the transaction, and they are considering submitting it to an administrative hearing that would likely kill the deal.
If the reports are correct (note that none of the companies or agencies involved are ready to comment on "speculation"), this is a major change from the rosy picture Comcast has painted since it announced its bid for TWC more than a year ago. According to Comcast's ongoing rhetoric, the deal would be overwhelmingly positive for consumers, and Comcast Executive Vice President David Cohen has repeatedly said that he expects the transaction to be approved.
On the latest reports of the DoJ's plans, however, a Comcast spokesperson said only to the WSJ, "We continue to believe that our transaction with Time Warner Cable Inc. (NYSE: TWC) will bring substantial benefits to consumers without any competitive harms. We will continue to engage in our productive discussions with the government and do not see any value in commenting on rumors and speculation."
So what happens if the deal is blocked? A lot of mess for one thing, but there are plenty of other short-term implications as well.
Here are a few takeaways to consider.
Comcast still reigns
Regardless of whether Comcast swallows up Time Warner Cable, it will still be the largest video service provider in the US unless you count Netflix Inc. (Nasdaq: NFLX), which brings in far less revenue per user than the cable giant. It will also still be the largest broadband provider, delivering Internet service with download speeds of at least 25 Mbits/s to more than half of the nation's subscribers. (See FCC Sets 25/3 as New Broadband Bar.)
That said, Comcast is feeling pressure from both new online video providers and the competitive marketing of new gigabit broadband services. If it can't acquire TWC, it will look for other ways to extend its customer base and to build up leverage for ongoing negotiations with programming and technology suppliers.
Next page: TWC goes on the block again