Tue | Oct 16, 2018

AT&T prepares to fight for Time Warner, citing ‘radical’ US action

Published:Wednesday | November 22, 2017 | 12:00 AM
In this Wednesday, December 7, 2016 photo, AT&T Chairman and CEO Randall Stephenson, left, and Time Warner Chairman and CEO Jeffrey Bewkes are sworn in on Capitol Hill in Washington, prior to testifying before a Senate Judiciary subcommittee hearing on the proposed merger between AT&T and Time Warner. (AP)

Seeing an attempt to block its buyout out of Time Warner as a "radical" departure by the United States government, AT&T is preparing for a fight to see the US$85 billion deal through.

One key asset owned by Time Warner, CNN, could create problems for the US and President Donald Trump, whose very public spat with the news network has raised suspicions that he might have interfered with the department's decision.

DOJ's antitrust chief, Makan Delrahim, insists that Trump did not tell him what to do. White House spokeswoman Sarah Huckabee Sanders said Monday she wasn't aware of any specific action related to the case taken by the White House.

In a press release, Delrahim said that a combined AT&T-Time Warner would "greatly harm American consumers" by hiking television bills and hampering innovation, particularly in online television service. The DOJ said AT&T would be able to charge rival distributors such as cable companies "hundreds of millions of dollars more per year" for Time Warner's programming payments that would ultimately get passed down to consumers through their cable bills.

In an emailed statement Monday, AT&T general counsel David McAtee said the lawsuit is a "radical and inexplicable departure from decades of antitrust precedent", and that the company is confident that it will prevail in court.

AT&T runs the country's second-largest wireless network and is the biggest provider of traditional satellite and cable TV services. Time Warner owns HBO, CNN, TBS and other networks, as well as the Warner Bros movie studio.

The government's objections to the deal surprised many on Wall Street. AT&T and Time Warner are not direct competitors, and "vertical" mergers between such companies have typically had an easier time winning government approval than deals that combine two rivals.

The last time the US government won a court victory in a vertical merger antitrust case was in 1972, when the Supreme Court said Ford's takeover of a spark plug business violated antitrust law.

Many had expected government approval of the deal because Obama-era antitrust officials approved a similar deal Comcast's purchase of NBCUniversal in 2011, after imposing restrictions on Comcast's behaviour that were meant to protect consumers.

As a candidate, however, Trump vowed to block the pending AT&T-Time Warner deal because it would concentrate too much "power in the hands of too few". As president, Trump has often blasted CNN for its coverage of him and his administration, disparaging it and its reporters as "fake news".

At a press conference Monday, AT&T CEO Randall Stephenson addressed speculation over whether the government's lawsuit was "all about CNN", saying, "Frankly, I don't know." But Stephenson said AT&T would not agree to anything that would result in it losing control of CNN.

A person familiar with the matter, who could not go on the record, previously told the Associated Press that DOJ wanted the combined company to sell either Turner the parent of CNN, TBS and other networks or DirecTV to satisfy its antitrust concerns.

A DOJ official, speaking on condition of anonymity in order to discuss a pending legal case, said Monday that the government is still willing to work with AT&T on "structural relief", or selling off assets.

AT&T has argued that buying Time Warner would let it package and deliver video more cheaply, over the Internet, rather than in expensive cable bundles. It already has a DirecTV Now streaming service, which puts popular live TV networks online, and costs US$35 a month and up, cheaper than traditional cable bundles.

Consumer advocates and some Democratic politicians applauded the lawsuit as a blow against media consolidation. Consumers Union, an advocacy group that opposes the deal, said there were "legitimate reasons" to block the deal to protect consumers, but called reports of political pressure "concerning".

The consumer advocacy group Free Press likewise praised the DOJ action, but its president, Craig Aaron, objected to Trump's "sabre-rattling" against CNN and other outlets that air criticism of the administration. Aaron called on the Justice Department to demonstrate its independence by reviewing TV station owner Sinclair's proposed takeover of rival Tribune. Sinclair is a conservative-leaning company.

This isn't the first time that AT&T has faced pushback from the government over an acquisition. The Justice Department also sued to block its US$39 billion bid of T-Mobile, a direct competitor, in August 2011. AT&T walked away months later.

- AP