AT&T Wins in Court to Merge With Time Warner

13 June, 2018, 02:32 | Author: Barbara Daniel
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Judge Richard Leon of the U.S. District Court for the District of Columbia said at a hearing that he has found, after a six-week trial, that the deal does not violate antitrust law and can proceed.

The decision means the telecom giant will now control highly sought after programming - including Game of Thrones, the Harry Potter movie franchise, and CNN - as well as the infrastructure that delivers that content to tens of millions of living rooms televisions and smartphones.

The merger's approval was a stinging defeat for the Justice Department, which could move to appeal Leon's ruling.

"This decision from Judge Leon will have broad ramifications for the tech, telecommunications and media sector for decades to come", said Daniel Ives, the chief strategy officer at GBH Insights.

And the AT&T-Time Warner deal is not necessarily yet in the clear.

But AT&T rejected that idea, stating in a court filing that, "Divestitures here would destroy the very consumer value this merger is created to unlock". He took issue with the government's analysis that the merger would result in higher prices for consumers, telling a packed courtroom that the findings "rested on improper notions". Leon rejected the government's position, which could lead to a flurry of entertainment mergers. But, he added, "the government's evidence is too thin a reed for this court to rely on". His 172-page decision delivered a stinging defeat to Trump administration's Justice Department while opening the door for Comcast Corp.to bid for parts of 21st Century Fox and become an global company.

A vertical merger is when two companies who provide different or complementary offerings join forces, giving consumers access to a more comprehensive set of services, at a lower price, while still generating profits. AT&T has been the nation's largest pay-TV company since it acquired DirecTV in 2015, and is one of the largest providers of home and mobile broadband service. It claims about 25 million of the 90 million or so USA households that are pay-TV customers.

AT&T and Time Warner announced their deal on October 22, 2016, in the midst of the bitterly contested presidential campaign between Donald Trump and Hillary Clinton. Major cable, satellite and phone companies are bulking up with purchases of entertainment conglomerates to compete against rivals born on the internet, like Amazon and Google.

The biggest impact of this deal will be felt quickly, as Comcast will now formally make an offer to Fox for the majority of its assets.

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.

"AT&T is buying Time Warner, and thus CNN", Trump said at a campaign rally in 2016. Leon sided with the telecom.

Shares of AT&T were about flat in after-hours trade following the decision, while Time Warner rose more than 5 percent.

"This deal will accelerate content and streaming initiatives between Time Warner properties and AT&T and be a major shot across the bow to other cable and wireless players with all these assets under one hood", he said. Post-merger, AT&T rivals like Charter Communications and Cox, which now pay Time Warner for its channels, would suddenly also become AT&T's customers.

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