By Christian Rojas
AT&T’s proffer to purchase Time Warner for $85.4 billion seems to be a done deal by the end of this year.[1] The U.S Department of Justice “DOJ” is currently in the final stages of review of the transaction [2] and is expected to approve the acquisition, as the companies do not directly compete. The deal would merge AT&T with Time Warner, and its entertainment assets including HBO, TNT, Warner Brothers, and CNN, thus formulating AT&T into a media giant. The acquisition would be the largest media deal of recent years. Once this transaction is complete, it is said, “AT&T will rely on its entertainment business for more than 40% of its revenue … strongly diversifying the company away from a U.S. wireless business that has become increasingly competitive.”[3] The DOJ deposed the executives of both companies and exacted thousands of documents to “discern if the deal would violate any competition laws.” [4] Randall Stephenson, AT&T’s chief executive, said, “AT&T is not eliminating a competitor, but rather is buying a supplier.”[5] Nonetheless, President Donald Trump already attacked this acquisition and said it is, “a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.”[6] Since then, Mr. Trump has yet to comment publicly about the deal.[7] Nonetheless, “presidents do not approve mergers, but they set the tone.”[8] The market, however, has been optimistic about the deal closing. The gap between Time Warner’s share price and AT&T’s cash-and-stock offer has decreased from 20% when the acquisition was first mentioned, to now 5% percent suggesting investors are betting the deal will close.[9]
Nevertheless, there are still concerns about the merger. Among the concerns raised is the possibility of AT&T favoring HBO over other TV brands in its marketing and prices.[10] This in turn could raise the prices for consumers who utilize satellite services.[11] After AT&T announced the merger, “AT&T offered HBO free for a year to some new video and unlimited wireless data subscribers.”[12] Content companies such as Starz and Showtime, have already expressed their concerns with AT&T potentially “offering free and unlimited viewing of HBO for its wireless customers while the streaming of competing premium channels would count against monthly data limits.”[13] The regulators however, seem to be confident in implementing conditions to combat these concerns.
Nonetheless, AT&T seems confident the DOJ will approve the transaction despite the delayed confirmation of Makan Delrahim as assistant attorney general in charge of antitrust matters.[14] AT&T recently sold $22.5 billion of bonds to fund the acquisition.[15] This merger could potentially raise costs for consumers. If AT&T charges its competitors higher rates, it is possible that these competitors will then shift the cost to consumers. Additionally, there is the possibility that AT&T will show preference to its phone carrier users when it comes to streaming shows on their phones.[16] As of now, consumers can only hope that the conditions imposed will be enough to prevent any negative impacts on prices and competition.
[1] Forbes, AT&T’s Time Warner Deal Looking Likely, Will It Be A Catalyst For The Stock, Forbes (Aug. 9, 2017, 1:55 PM), https://www.forbes.com/sites/greatspeculations/2017/08/09/atts-time-warner-deal-looking-likely-will-it-be-a-catalyst-for-the-stock/#7354c94d183b.
[2] Id.
[3] Thomas Gryta et al., AT&T reaches Deal to Buy Time Warner for $85.4 Billion, Wall Street J. https://www.wsj.com/articles/at-t-reaches-deal-to-buy-time-warner-for-more-than-80-billion-1477157084 (last updated Oct. 22, 2016).
[4] Cecilia Kang & Michael J. de la Merced, AT&T’s Blockbuster Deal for Time Warner Hangs in Limbo, N.Y. Times (July 9, 2017), https://www.nytimes.com/2017/07/09/technology/att-time-warner-merger.html?mcubz=3.
[5] Gryta et al., supra note 3.
[6] Drew FitzGerald & Joe Flint, Trump threatened to kill the AT&T-Time Warner deal, but it’s very much alive, Fox Business (Aug. 18, 2017), https://www.foxbusiness.com/features/2017/08/18/trump-threatened-to-kill-at-t-time-warner-deal-but-its-very-much-alive.html.
[7] See id.
[8] Id.
[9] See id.
[10] Id.
[11] Kang & de la Merced, supra note 4.
[12] Fitzgerald & Flint, supra note 6.
[13] See id.
[14] See id.
[15] Forbes, supra note 1.
[16] Kang & de la Merced, supra note 4.
