Time Warner merger with AT&T gets judge's approval

Gladys Abbott
June 13, 2018

And the AT&T-Time Warner deal is not necessarily yet in the clear. The $85.4 billion merger was first put forth in October 2016, but a deal like this was met with intense scrutiny from regulators, as it will have major implications on the media landscape moving forward.

AT&T and Time Warner are not competitors; theirs would be a "vertical integration" of complementary companies: Time Warner makes the TV shows (and movies and news programming and so forth), while AT&T offers the satellite and cable TV services and mobile phone systems on which people consume such content. The ruling could open the floodgates to deal-making in the fast-changing entertainment and video-content worlds.

On Tuesday, Judge Leon ruled that the Trump administration could not block the deal.

Leon said the government's case fell short on all counts and warned against seeking to delay the deal with an appeal saying that would cause irreparable harm to the companies.

The case was closely watched by telecom and media industry analysts, corporate executives, and Wall Street.

In a scathing opinion bit.ly/2Jxx6qE, he urged the USA government not to seek a stay of his ruling, saying it would be "manifestly unjust" to do so and not likely to succeed.

U.S. district judge Richard Leon dismissed the antitrust case brought by the justice department last November, the culmination of a 20-month ordeal that has seen the deal attacked by Donald Trump, critics of media consolidation and consumer groups. "For AT&T and Time Warner, this is a major victory lap".

The Justice Department, which had sued to block the purchase, has the option of appealing the decision.

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The Justice Department filed the suit in November alleging that AT&T would be able to hike rates of its premium channel packages and wrangle higher retransmission fees of Time Warner networks such as Cartoon Network, TBS and CNN from competing pay-TV services. It may immediately trigger another deal between Comcast and Fox, which already has an agreement to sell its entertainment assets to Walt Disney. Comcast, which had earlier bid for the Fox assets but lost out to Disney, is expected to renew its pursuit now that AT&T has won.

"This will be a blockbuster summer for media mergers", said Mary Ann Halford, senior adviser to OC&C Strategy Consultants.

"The government may very well argue that that will increase prices by diminishing choices for consumers", he said. But AT&T CEO Randall Stephenson remained at the company's headquarters in Dallas, and he learned of the ruling when AT&T general counsel David McAtee called him, a spokesperson said.

After the ruling, Time Warner's stock dropped almost 5 percent in after-market trading.

AT&T said that controlling Time Warner's cable brands will help it craft new types of content to retain its customers as web-based rivals like Netflix Inc woo audiences away from traditional pay-TV subscriptions.

Critics charged that Trump had come out against the deal because of Time Warner's CNN, which has been highly critical of his presidency.

The Justice Department is not likely to be put off by the loss, said Amy Ray of the law firm Cadwalader, Wickersham & Taft LLP, noting it had prevailed in stopping other mergers between rivals.

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