Judge clears deal to transform TV terrain
A federal judge ruled in favor of AT&T’s $85 billion acquisition of Time Warner on Tuesday in a decision that is likely to raise the curtain on mega-mergers among the nation’s entertainment companies.
U.S. District Judge Richard Leon did not impose any conditions that would have prompted AT&T to scuttle the deal, further emboldening legacy Hollywood and telecommunication companies to pair up in an effort to counter deep-pocketed new tech rivals such as Netflix, Amazon, Apple and Google.
Even before the decision, Comcast said it was prepared to bid for 21st Century Fox’s assets, signaling a price war with Disney, which agreed to pay
$52 billion for the studios that would help Disney offer Netflix alternatives.
Tuesday’s ruling is a pivotal chapter in a 20-month saga that began in October 2016 when the largest U.S. telecommunication company first reached an agreement to buy Time Warner in a grab for TV and film content that would diversify its mammoth but mature internet access business.
Time Warner is a hangout for DC Comics’ superheroes Batman, Superman and Wonder Woman, as well as CNN and HBO, the premium network where “Game of Thrones” resides, and TNT, which just aired some of the NBA playoffs. AT&T owns pay-TV provider DirecTV, alongside its extensive landline, wireless and internet access businesses.
AT&T argued that a bigger company would offer consumers more services, such as cheaper streaming.
“In particular, we would expect aggressive bundling of HBO, CNN and other proprietary sports content (NBA, NCAA, MLB) from Time Warner into the AT&T network as a key incentive for current and new AT&T wireless customers,” Daniel Ives, head of technology research at GBH Insights, wrote in a note to investors.
The U.S. government sued to block the transaction, arguing the larger company would have too much power and individuals’ TV tab would rise as a result.
Some consumer groups, lawmakers and a trade group that represents smaller cable operators said the outcome was bad for consumers.
Judge Leon urged the government not to appeal the decision.
Assistant Attorney General Makan Delrahim said the Justice Department plans to review the opinion and “consider next steps in light of our commitment to preserving competition for the benefit of American consumers.” AT&T looks to close the deal on or before June 20.
Time Warner’s stock climbed 4.9 percent in afterhours trading. AT&T shares dropped about 1.6 percent.
The case was the most important U.S. antitrust case since the Department of Justice’s attempt to block Microsoft from using its Windows operating system to monopolize software such as web browsers on computers. After a six-week trial, the judge ruled from a packed courtroom. Leon has been at the forefront of other media mergers; he presided over the ComcastNBC-U mega-deal in 2011.
The deal’s approval is likely to let loose a stampede of merger and acquisition activity in the media and entertainment space, starting with a titanic battle between Disney and Comcast for Fox assets.
Comcast stock declined nearly 4.6 percent in afterhours. Disney shares dropped nearly 1.5 percent. Fox shares rose 1 percent.
T-Mobile and Sprint are pursuing their own $26 billion merger that would create a larger No. 3 cellphone carrier. The entire telecom industry is dealing with cooling revenue from traditional sources such as sub-
“We would expect aggressive bundling of HBO, CNN and other proprietary sports content from Time Warner into the AT&T network.” Daniel Ives GBH Insights
scribers.
Recon Analytics analyst Roger Entner envisions Silicon Valley stalwarts such as Google, Apple and Facebook “that are currently putting a toe into (such activity), putting their whole foot into it.”
Having been rebuffed on AT&T-Time Warner, it wasn’t clear where the Trump administration might come down on other mergers.
“They’re going to bring cases, but they’re going to look at each case on its merits,” says Henry Su, a partner at Constantine Cannon in Washington.
As the merger moves forward, AT&T may temper any rise in TV prices, at least for now.
“The parties may do whatever they can to forbear from engaging in any allegedly anti-competitive behavior just so that the court of public opinion will be able to say, ‘Oh yeah, it’s fine,’ ” Su says.
Contributing: Mike Snider