AT&T Inc.’s Time Warner takeover has already opened the flood gates. Good luck closing them now.
The U.S. Justice Department said Thursday that it’s appealing Judge Richard Leon’s sweeping ruling last month that allowed the $109 billion transaction to close with no conditions whatsoever. But it feels like this is too little, too late.
AT&T is now the owner of Time Warner—in fact, it’s already changed the name of the TV-network and film business to WarnerMedia to avoid confusion with Time Warner Cable, the former cable company that was so, ahem, beloved by consumers (and which is now owned by Charter Communications Inc. and goes by the Spectrum brand name). As much as the Justice Department’s argument against the merger had merit and the thinking around antitrust needs updating, the judge was right that DOJ lawyers didn’t meet their burden of proof. They needed more evidence and less speculation. Simply put, they weren’t prepared.
This cross-examination of the Justice Department’s first witness in the case, Cox Communications’ Suzanne Fenwick, says it all—so much so, in fact, that Judge Leon noted it in his opinion:
Q: So let’s talk about that. How many customers are going to leave [Cox] even with the reduction in your price to your cable subscribers, how many?
A: We don’t know.
Q: Have you tried to compute it?
A: I have not.
Q: You have no idea?
A: We believe that it’s a large number.
Q: I know you believe that, but do you have any evidence, any information, any hard facts?
A: I don’t have a churn analysis for you, no.
Q: Do you think you had an obligation in giving testimony to oppose a merger of this importance that you would do some homework and run some numbers?
A: No, we felt like our job was to point out how the leverage changes.
Q: So you think you could just come in here and give your opinion that the leverage is going to change and you’re going to lose all of these customers even though you have no idea how many customers you’re going to lose and you’ve never done a single bit of quantitative analysis; is that true?
Even AT&T shareholders don’t seem overly concerned by the notice of appeal, based on late trading Thursday. The stock fell about 1 percent:
Passage of the AT&T-Time Warner deal signaled that just about anything goes in M&A nowadays. Walt Disney Co. was approved, rather quickly, to buy most of 21st Century Fox Inc., and Comcast Corp. thinks it can get permission to do the same. Earlier Thursday, Reorg Research reported that the Justice Department is expected to support approval of CVS Health Corp.’s $68 billion takeover of Aetna Inc., a so-called vertical merger not unlike AT&T that seemed to have a greater chance of winning the regulatory nod after AT&T’s triumph.
Here are other megadeal permutations that are possible in and around the media sphere—and some wouldn’t have been before the AT&T ruling:
While it’s unclear from Thursday’s notice exactly what the DOJ’s argument is, AT&T has provided at least some new material for the government’s case. It recently hiked the price of its base package for the DirecTV Now streaming service by $5 a month, though that was after rival Sling TV (owned by Dish Network Corp.) did the same. It also raised the administrative fee for AT&T wireless customers to $1.99 from 76 cents.
Even so, it’s hard to imagine that a month after the DOJ lost the case, it’s ready to try again when the egg is still so visible.
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