June 12, 2018 / 10:03 PM / 10 months ago

Breakingviews - AT&T gets law right this time, but could regret it

An AT&T logo is seen at a AT&T building in New York City, October 23, 2016. REUTERS/Stephanie Keith

NEW YORK/WASHINGTON (Reuters Breakingviews) - This time AT&T got the law right. A judge cleared the telecom firm’s $85 billion Time Warner purchase, handing the U.S. Department of Justice a comprehensive defeat. It’s a win for Chief Executive Randall Stephenson, but it could come with a winner’s curse.

U.S. District Court Judge Richard Leon not only blessed the union with no strings attached, he urged Donald Trump’s antitrust enforcers not to seek a stay while they decide whether to appeal. Doing so, he said, would be “manifestly unjust” since the deadline for closing the deal falls next week.

Regulators argued that the tie-up would hurt consumers because AT&T would have an advantage over rival distributors that wanted access to Time Warner content, like HBO’s “Game of Thrones” for example. AT&T said the deal would help it better compete with other giants like Facebook and Alphabet’s Google for digital-advertising dollars.

The DOJ was pushing the envelope, given the two companies involved don’t have any real business overlaps. And there isn’t much history of actual trials, because most companies walk away from deals that are challenged or agree to concessions. Comcast, for example, accepted restrictions protecting other distributors of content in its acquisition of NBC Universal.

Stephenson tried seven years ago to buy smaller cellphone rival T-Mobile US. The government sued to block the deal and T-Mobile walked away with as much as $6 billion worth of cash and spectrum. The AT&T CEO could ill afford another big legal setback. Now, though, he has to make something of Time Warner’s assets, including HBO, the Warner Bros movie studio and news network CNN.

AT&T’s shares fell 2 percent in after-hours trading on Tuesday following the decision. That may be an early indication that it won’t all be plain sailing. The company has never produced content before and will be new to the challenges of managing creative talent and spotting the next GoT-style blockbuster. Netflix, Amazon and Apple are spending billions on TV shows and movies. That makes it tough to slash costs enough to justify the hefty premium being paid. AT&T may come to regret its victory.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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