As Com­cast with­draws, Char­ter Com­mu­ni­ca­tions steps for­ward.

Com­cast’s de­ci­sion to drop its bid could put Time Warner Ca­ble in play again. Dodgers fans won­der when games might be widely tele­vised.

Los Angeles Times - - FRONT PAGE - By Jim Puz­zanghera and Meg James

Pay-tele­vi­sion leader Com­cast Corp. with­drew its $45-bil­lion bid for Time Warner Ca­ble Inc. in the face of a long fight with fed­eral reg­u­la­tors, send­ing the smaller ca­ble firm on its own in a churn­ing mar­ket­place with­out the heft it had sought in a merger.

The de­ci­sion, an­nounced Fri­day, came af­ter fed­eral reg­u­la­tors ear­lier this week made their op­po­si­tion to the deal on an­titrust grounds clear to both sides.

Mean­while, Char­ter Com­mu­ni­ca­tions Inc. re­vived its in­ter­est in ac­quir­ing Time Warner Ca­ble and its crown jewel mar­kets of Los An­ge­les and New York, ac­cord­ing to a per­son close to the sit­u­a­tion who asked not to be iden­ti­fied dis­cussing the sit­u­a­tion.

Char­ter, backed by bil­lion­aire John Malone, took its first shot at the ac­qui­si­tion in mid-2013. That bid led Time Warner Ca­ble to ap­proach Com­cast, which called off the ef­fort af­ter a 14-month battle to win reg­u­la­tory ap­proval.

Robert D. Mar­cus, chief ex­ec­u­tive of Time Warner Ca­ble, de­clined to say whether the com­pany would seek an­other deal. But an ac­qui­si­tion or a merger could even­tu­ally be an op­tion for a com­pany that is stronger than it was when the deal with Com­cast was an­nounced, he said.

“We are ex­e­cut­ing on our op­er­at­ing plan, and in the last year, we have built on our op­er­at­ing mo­men­tum,” he said.

The com­pany, which Mar­cus called a “one-of-a-kind as­set,” spent $1.7 bil­lion last year im­prov­ing its net­work. It’s the sec­ond-largest ca­ble car­rier and the fourth-largest pay-TV provider.

For years, Time Warner Ca­ble strug­gled with out­dated tech­nol­ogy and a clunky in­ter­face for con­sumers. But while the Com­cast deal was pending, Time Warner Ca­ble im­proved op­er­a­tions, in­creased its In­ter­net speeds and worked to re­tain cus­tomers.

Now an­a­lysts ques­tion whether the com­pany can shift gears again to dance with an­other suitor at a time of mount­ing com­pe­ti­tion from satel­lite TV and other com­peti­tors. Most an­a­lysts see the smaller Char­ter as the most likely part­ner.

More wor­ri­some to some in L.A., per­haps, is what Time Warner Ca­ble will do with Sport­sNet LA, the Dodger­sowned chan­nel. The ca­ble firm is pay­ing nearly $8.4 bil­lion over 25 years for the ex­clu­sive rights to dis­trib­ute the chan­nel, but it has failed to sell

the pro­gram­ming to other ma­jor car­ri­ers, leav­ing tele­casts un­avail­able to most homes in the Los An­ge­les mar­ket.

The deep-pock­eted Com­cast now has other op­tions. It could de­clare a stock buy­back plan to as­suage in­vestors or go back on the hunt for an­other deal.

Some an­a­lysts be­lieve it could go af­ter a tele­com com­pany such as T-Mo­bile US Inc. to bet­ter com­pete with the likes of AT&T Inc., which it­self is try­ing to get into the pay-TV mar­ket with a pro­posed ac­qui­si­tion of DirecTV. But Chief Ex­ec­u­tive Brian Roberts dis­missed such talk.

Time Warner Ca­ble has about 11 mil­lion sub­scribers, in­clud­ing 2 mil­lion in South­ern Cal­i­for­nia, which makes the com­pany the largest pay-TV provider in the re­gion.

Char­ter has about 4.3 mil­lion sub­scribers, of which about 300,000 are in the re­gion, mostly Long Beach, Bur­bank and La Cañada Flin­tridge.

In the broader pay-TV mar­ket, which in­cludes satel­lite and tele­com providers, Time Warner ca­ble is No. 4 and Char­ter is No. 7.

Rich Green­field, me­dia an­a­lyst at BTIG Re­search, said he didn’t think Char­ter could pull off an ac­qui­si­tion of Time Warner Ca­ble.

“I’d be sur­prised if a lit­tle com­pany could swallow that big of a com­pany. It’s one thing for Go­liath to swallow an­other Go­liath,” he said. “I don’t see Char­ter buy­ing it.”

Wall Street ap­peared to cheer the prospects of an­other deal. Time Warner Ca­ble shares jumped $6.50, or 4.4%, to $155.26 on Fri­day. Char­ter shares rose $2.17, or 1.2%, to $185.75. Mean­while, Com­cast stock rose 41 cents, or 0.7%, to $59.64.

An­other deal might not pro­voke the same alarm at the Depart­ment of Jus­tice and the Fed­eral Com­mu­ni­ca­tions Com­mis­sion, both of which were more con­cerned about the dom­i­nance Com­cast would have than with a sale of Time Warner Ca­ble.

The Jus­tice Depart­ment said it had “sig­nif­i­cant con­cerns that the merger would make Com­cast an un­avoid­able gate­keeper for In­ter­net­based ser­vices that rely on a broad­band con­nec­tion to reach con­sumers.”

Given the con­cerns, Roberts said the two com­pa­nies agreed to give up on the deal.

“To­day, we move on,” he said.

Atty. Gen. Eric H. Holder Jr. and FCC Chair­man Tom Wheeler, whose agen­cies shared re­spon­si­bil­ity for re­view­ing the deal, said Com­cast’s de­ci­sion to aban­don the deal was in the best in­ter­est of U.S. con­sumers.

The deal un­rav­eled this week af­ter high-level meet­ings with fed­eral reg­u­la­tors in which Com­cast and Time Warner Ca­ble ex­ec­u­tives learned that the gov­ern­ment was pre­par­ing to chal­lenge the pro­posed trans­ac­tion.

As part of their re­view, Jus­tice Depart­ment staff in­ter­viewed rep­re­sen­ta­tives at more than 100 com­pa­nies. Nearly all had deep reser­va­tions about how the pro­posed merger could af­fect the devel­op­ment of the In­ter­net, said a Jus­tice of­fi­cial in­volved in the re­view who asked not to be iden­ti­fied.

Had the deal been ap­proved, Com­cast would have con­trolled 57% of the high-speed broad­band mar­ket.

Pro­gram­ming com­pa­nies wor­ried that a bulkedup Com­cast would have the power to set pric­ing for their con­tent and the rates that ad­ver­tis­ers pay for spots on ca­ble TV.

The Jus­tice Depart­ment in­ves­ti­ga­tion even­tu­ally fo­cused on the in­ner work­ings of In­ter­net traf­fic flows and the so-called in­ter­con­nec­tion point. That’s the spot where broad­band lines branch off and even­tu­ally travel into cus­tomers’ homes.

An ac­qui­si­tion would have put Com­cast in con­trol of the so-called last mile of In­ter­net lines into at least 30 mil­lion homes, more than a third of U.S. house­holds with high-speed In­ter­net ac­cess.

Com­cast would have picked up those lines in the Los An­ge­les and New York mar­kets, in ad­di­tion to the ones it al­ready con­trols in Chicago, Philadel­phia, San Fran­cisco and Seat­tle.

The gov­ern­ment team quickly dis­cov­ered that, were it al­lowed to bulk up fur­ther, Com­cast “would have a lot of lever­age at that in­ter­con­nec­tion point,” said the Jus­tice Depart­ment of­fi­cial.

Cast­ing a shadow over the de­bate was a dis­pute that movie-stream­ing firm Net­flix Inc. had with Com­cast early last year. That f lap cen­tered on In­ter­net traf­fic flows and Net­flix pay­ments to de­liver traf­fic to homes served by Com­cast.

Although the Net­flix dis­pute did not fac­tor in to the in­ves­ti­ga­tion, “it made it clear there was a gate there, an im­por­tant gate, and peo­ple felt that they had to deal with Com­cast in or­der to reach con­sumers,” the Jus­tice of­fi­cial said.

Mean­while, FCC of­fi­cials were in­creas­ingly wor­ried that the com­bined com­pany would pose an un­ac­cept­able risk to the emer­gence of new pro­gram­ming ser­vices de­liv­ered over the In­ter­net, said a se­nior FCC of­fi­cial who spoke on the con­di­tion of anonymity.

Of­fer­ings such as HBO Now and Dish Net­work’s Sling TV prom­ise to give con­sumers more op­tions — and a rea­son to cut the ca­ble cord. The FCC was con­cerned Com­cast would have the mar­ket power to shut those op­tions down just as they were com­ing to mar­ket, the agency of­fi­cial said.

Com­cast’s Roberts de­clined to crit­i­cize the reg­u­la­tors Fri­day for op­pos­ing the deal.

“It wasn’t go­ing to hap­pen. That was the judg­ment we heard and the gov­ern­ment had reached,” Roberts said on CNBC-TV. “We have to live with it and re­spect that and move on.”

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