February 21, 2019
Judge rules for AT&T, Time-Warner deal that will change TV viewing
WASHINGTON--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 telecommunications companies to pair up in an effort to fight deep-pocketed 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 Oct. 2016 when the largest U.S. telecommunications 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 benefit consumers because it would allow it to offer more new services, like a cheaper streaming service.

"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," wrote Daniel Ives, head of technology research at GBH Insights, in a note to investors.

The U.S. government sued to block the transaction this past November, arguing the larger company would have too much power and that individuals' TV tab would rise as a result. That was the position of Donald Trump when he was still a presidential candidate.

Some consumer groups, lawmakers and a trade group that represents smaller cable operators said the outcome was bad for consumers.

Judge Leon strongly urged the government not to appeal the decision.
Justice Department assistant attorney general Makan Delrahim said the agency 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% in after-hours trading. AT&T shares dropped around 1.6%.

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, who also presided over the Comcast-NBC-U mega-deal in 2011,ruled from a packed courtroom.

Approving the deal is expected to let loose a stampede of M&A 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% in after-hours. Disney shares dropped nearly 1.5%. Fox shares rose 1%.

T-Mobile and Sprint are pursuing their own $26 billion merger that would create a larger No. 3 cell-phone carrier. The entire telecom industry is dealing with cooling revenues from traditional sources such as subscribers.

Recon Analytics analyst Roger Entner envisions Silicon Valley stalwarts like 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 isn't immediate obvious where the Trump Administration might come down on future mergers.

“They’re going to bring cases, but they’re going to look at each case on its merits, expects Henry Su, a partner at Constantine Cannon is Washington, D.C.

Suspense about the outcome has been building since the trial ended April 30. A new twist emerged in early May with the revelation that AT&T paid President Trump's personal lawyer Michael Cohen $600,000 for consulting services at the time the company was seeking regulatory approval for the merger.

AT&T CEO Randall Stephenson said hiring Cohen for insights into the new administration was legal but "was a big mistake."

Even with the merger moving forward, AT&T may temper any rise in TV prices, at least for now. “The parties may do whatever they can to forebear 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. (Source: USA Today)
Story Date: June 13, 2018
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