AT&T Wins in Court to Merge With Time Warner

AT&T-Time Warner Decision: Either Way, Media Is Ailing

AT&T Inc. won approval from a USA court on Tuesday to buy Time Warner Inc for US$85 billion, allowing AT&T to compete with internet companies that dominate digital advertising and providing new sources of revenue. In February, Rep. Elijah E. Cummings, the ranking member of the House Committee on Oversight and Government Reform, and Rep. Gerald E. Connolly, the ranking member of the Subcommittee on Government Operations, sent a letter to Attorney General Jeff Sessions asking for documents and emails between the Justice Department and the White House about the decision to sue AT&T and Time Warner.

Prior to the news on the decision in the case, AT&T stock closed up 0.5% (to $34.50 per share) and Time Warner closed up 0.05% in regular trading (to $96.22 per share) which concluded at 4 p.m. ET.

"We believe AT&T's strategy to segment its video products (away from just the big bundle, and into four different linear/streaming-based tiers) is a very practical one that could open the door to new potential customers", said Deutsche Bank analyst Matthew Niknam in a research note. The DOJ moved to block the merger in March, arguing that the merger would reduce competition and hurt consumer choice. He noted that Time Warner owned CNN, and then declared his opposition to the $85 billion proposed sale. That's not to say that vertical mergers get through regulatory approval free and clear - the FTC has fought 22 vertical mergers since 2000 - but they receive less scrutiny than horizontal mergers.

The ruling is a stinging defeat for the Justice Department. Disney has a deal to buy the bulk of Fox, but Comcast is now expected to make a counterbid, especially with the favorable ruling for AT&T.

It's also worth noting that President Trump has been publicly opposed to the deal since he was on the campaign trail.

As a candidate for president, Trump vowed to block the merger, stating it would concentrate too much power in one company.

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Critics charged that Trump had come out against the deal because of Time Warner's CNN, which has been highly critical of his presidency.

The government's case hinged on an economic model produced by Carl Shapiro, an economist at the University of California at Berkeley, who predicted an annual price increase to consumers of at least $285 million. The government's star witness was Carl Shapiro, an economist at the University of California, who used an economic model to predict that consumer cable bills could rise by $500 million annually in aggregate by 2021.

AT&T Chairman and CEO Randall Stephenson argued the company's proposed $85.4 billion takeover of Time Warner is necessary to compete against companies like Amazon, Facebook, and Google.

The companies' main economist, Dennis Carlton from the University of Chicago, refuted Shapiro's model as overly complicated and rejected his conclusions.

AT&T said it intends to close the merger by June 20.

It's been years in the making, but the mammoth merger of AT&T and Time Warner Inc.is officially going to happen.

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