Wednesday, 21 November, 2018

Trump administration fails to block AT&T/Time Warner merger

The expected decision on AT&T’s merger with Time Warner will have ramifications for many blockbuster deals The expected decision on AT&T’s merger with Time Warner will have ramifications for many blockbuster deals
Nellie Chapman | 13 June, 2018, 01:17

If Senior United States District Judge Richard Leon approves AT&T's purchase of Time Warner today, analysts and investors are likely to read it as a positive sign for the proposed merger of T-Mobile and Sprint. It could have an impact on future mergers and acquisitions between content providers and creators.

The lawsuit against AT&T had cast a pall over that activity, as a sign that the Department of Justice, under new Trump appointees, was taking a more hard line stance to mega-deals.

Rival cable company Comcast is now likely to go ahead with its planned attempt to woo Twenty-First Century Fox Inc away from Walt Disney Co, which said it would acquire most assets of the media company for around $50 billion a year ago.

Some thought Trump had pressed for the lawsuit because of his animus toward Time Warner's CNN.

Leon said the evidence and testimony provided by the government were faulty and that it never proved the merged entity would have increased leverage over its competitors. The judge put no conditions on the deal.

The Justice Department argued that the merger between AT&T and Time Warner would introduce unfair advantages in the marketplace.

With or without Time Warner, AT&T is very focused on its media business. It may immediately trigger another deal between Comcast and Fox, which already has an agreement to sell its entertainment assets to Walt Disney.

During the trial, the judge heard from dozens of witnesses, including AT&T CEO Randall Stephenson and Time Warner CEO Jeffrey Bewkes.

The Justice Department had repeatedly suggested the judge consider forcing AT&T to divest some of Time Warner's cable channels. In recent decades, the government's antitrust enforcement actions have focused on deals where one company threatened to dominate too much of a specific industry.

The company plans to close the deal by June 20, according to a statement from AT&T's general counsel David McAtee. First floated in October 2016, the deal also brought fire from then-candidate Donald Trump, who promised to kill it "because it's too much concentration of power in the hands of too few". The government's star witness was Carl Shapiro, an economist at the University of California, who used an economic model to predict that consumer cable bills could rise by $500 million annually in aggregate by 2021.

"We are gratified that the court's decision to categorically reject the government's bid to block this historic merger", he said. He rejected the government's argument that it would hurt competition in pay TV and cost consumers hundreds of millions of dollars more to stream TV and movies. A loss for AT&T and Time Warner could have signaled a new era of government scrutiny over so-called "vertical mergers" and could have halted attempts by companies like Disney, Fox and Comcast to announce their own megadeals.

AT&T, which has invested heavily in a streaming video service called DirecTV Now, is free to bulk up its original programming with Time Warner content.