Time Warner Stock Jumps, AT&T Falls After Ruling Clears Path to Merger
Jun 13 2018
Still, at least one company, Comcast, the largest USA cable provider, had been waiting for the court decision before making any large M&A moves in media, sources have said.
The Justice Department filed a lawsuit to stop the deal in November 2017, saying that AT&T's ownership of both DirecTV and Time Warner would give AT&T unfair leverage against rival cable providers that relied on Time Warner's content, such as CNN and HBO's "Game of Thrones".
While this court case is decided, the U.S. Department of Justice could appeal the ruling. "If it's narrow, like 'I don't think Time Warner content is that must-have, ' that may have implications in a similar merger in the telecommunications space but may not have a drastic effect in other vertical mergers", said Caroline Holland, who was in the Antitrust Division during the administration of former President Barack Obama. 'We're chasing their tail lights, ' Petrocelli said.
The US had sued to block the deal, arguing that it would reduce competition in pay TV and lead to higher prices for consumers. He said the merger "would unlawfully raise prices for cable-TV subscribers and harm online innovation".
During the trial, the judge heard from dozens of witnesses, including AT&T CEO Randall Stephenson and Time Warner CEO Jeffrey Bewkes.
Some critics of President Trump have questioned whether the case was brought as political payback against Time Warner's CNN for unfavorable coverage of President Trump, who often called the cable news channel "fake news". Announcedin October 2016, it was seized on by then presidential candidate Donald Trump as the sort pf deal his administration would block. However, AT&T has argued that making such a deal would be necessary to compete against other tech companies.
Waiting in the wings are potential big-billions deals involving 21st Century Fox and Disney, Verizon and CBS, T-Mobile and Sprint.
In making its case, the USA government argued that the merger of AT&T could harm consumers in a number of ways.
The companies' main economist, Dennis Carlton from the University of Chicago, refuted Shapiro's model as overly complicated and rejected his conclusions.
"AT&T/DirecTV would hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for Time Warner's networks, and it would use its increased power to slow the industry's transition to new and exciting video distribution models that provide greater choice for consumers", the DOJ said in its complaint. In fact, he suggested, consumers could end up paying less after a merger - maybe even $500 million less annually.
But Comcast has said it's prepped to top Disney's bid for the 21CF assets - and it's widely expected that Comcast will pull the trigger now that the AT&T-Time Warner merger has the go-ahead. AT&T and Time Warner say that by coming together they can create synergies of data and information that will help them make better content and sell more targeted ads, which they claim could ultimately help lower prices for consumers. The company said in a statement that it plans to complete the takeover on or before June 20.