The New York State Public Service Commission voted on Friday to revoke its approval of Charter Communications' (NASDAQ: CHTR) $56.7 billion acquisition of Time Warner Cable (NYSE: TWX), claiming that Charter failed to meet obligations related to its buildout of broadband and the company must end its operations in the state.
The commission said the US broadband provider failed to live up to its agreement as part of the merger to build internet access to an additional 145,000 households and businesses in rural areas of New York underserved by internet providers.
"After more than a year of administrative enforcement efforts to bring Charter into compliance with the Commission's merger order, the time has come for stronger actions to protect New Yorkers and the public interest," Commission Chairman John B. Rhodes said in a statement.
Charter shares were down 0.5% to $285.37 in afternoon trading, after declining as much as 1%.
The commission said it will begin a special proceeding or action in the New York State Supreme Court to seek penalties for Charter's violations. The company has 30 days to appeal the commission's decision to revoke its agreement to the merger. It has 60 days to file a plan with the commission to transition its New York customers to other providers, the commission said.
Charter said in a statement that "in the weeks leading up to an election, rhetoric often becomes politically charged. But the fact is that Spectrum has extended the reach of our advanced broadband network to more than 86,000 New York homes and businesses since our merger agreement with the (commission). Our 11,000 diverse and locally based workers, who serve millions of customers in the state every day, remain focused on delivering faster and better broadband to more New Yorkers, as we promised."
What's worse is that in addition to rescinding its approval of the Charter and Time Warner merger, the commission also filed an enforcement action in the New York State Supreme Court to seek $3 million in penalties for past failures and continuing noncompliance. The PSC listed five areas of Charter's alleged misconduct: repeated missed deadlines, attempts to avoid obligations to rural communities, unsafe practices, failure to fully commit to the merger obligations and purposeful obfuscation of its performance and compliance obligations.
In addition to not meeting deadlines, the PSC also said Charter falsely claimed it was meeting and exceeding its commitments in advertisements, leading the Commission to file a false advertising claim with the state Attorney General's office.