Regulatory prospects for the proposed $45.2 billion merger of Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) went from bad to bleak Wednesday, with the Federal Communications Commission recommending that final approval for the deal be handled by an administrative law judge.
The decision by the FCC to issue a "hearing designation order" came as Comcast and TWC executives were meeting with U.S. Justice Department officials, who are weighing a lawsuit to block the merger.
According to numerous published reports citing inside sources on those closed-door meetings, the talks were non-conclusive--the beginning of negotiations between two sides who haven't met face-to-face since the deal was first proposed 14 months ago.
However, the inside scuttlebutt from the DOJ is that it will seek major concessions from a combined company that would control, if greenlit, nearly 30 percent of U.S. pay-TV subscriptions and around 57 percent of the broadband market.
Facing very similar obstacles with the FCC and DOJ in 2011, AT&T walked away from its proposed $39 billion takeover of T-Mobile.
Among Wall Street media analysts, the talk seems to be turning away from will the Comcast-TWC merger be approve and to what's going to happen when it isn't.
"In the event that the current deal does not come to fruition, we expect renewed interest in TWC from Charter," reads a note issued Thursday morning from investment advisory firm Jefferies. "We believe that such a transaction could yield higher share accretion and face less regulatory push-back."
Added analyst Craig Moffett, in another Thursday investor memo: "No, the Comcast deal isn't dead yet. But it's a bit like an elephant that has been dropped out of an airplane. At around 10,000 feet, it is technically still alive. But it is falling fast, there's not much you can do to stop it, and its odds of survival are pretty low when it hits the ground."
- read this Wall Street Journal story
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Updated: This article was updated April 23 to correct a factual error that stated AT&T walked away from its proposed $39 billion takeover of Sprint.