For Comcast, breakup talk is cheap

April 23, 2015, 7:51 PM UTC
Photograph by Joshua Lott — Reuters

Comcast (CMCSA) reportedly will announce as early as tomorrow that it is abandoning its $45 billion merger with Time Warner Cable (TWC), after regulators reacted poorly to its “our monopolies don’t overlap” defense.

But there is at least one silver lining for Comcast: It isn’t paying a breakup fee.

There is no market standard for termination fees, but it’s usually between 2% and 5%. In this case, that would have worked out to upwards of $2.25 billion.

Sometimes it’s significantly higher, like when AT&T (T) shelled out between $4 billion and $6 billion (depending on how you do the math) after its $39 billion T-Mobile USA (TMUS) acquisition failed in late 2011.

In that situation, AT&T CEO Randall Stevenson later said that T-Mobile USA had insisted on the breakup fee during negotiations, which he understood since the latter company was basically taking itself out of play for 18 months. No idea why Time Warner Cable didn’t do the same, unless it bought the partisan argument that Comcast had close enough White House ties that regulatory approval would be little more than a formality. Or perhaps it was just an early sign that Comcast didn’t really have the full courage of its convictions.

So a bad day for Comcast. But not quite as bad as it could have been.

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