AT&T fought the DOJ over Time Warner, only to split three years later

Then-WarnerMedia CEO John Stankey speaks in 2016.

John Lamparski | Getty Images Entertainment | fake images

Just three years ago, AT&T finally closed its $ 85 billion deal to buy Time Warner, ending a protracted battle with the Justice Department under then-President Donald Trump, who sought to block the deal.

It is now deriving its media assets from the deal to combine them with Discovery and create a content giant. If the deal is approved by regulators, AT&T will receive $ 43 billion in cash, debt and WarnerMedia’s retention of part of the debt, while effectively rolling back its previous merger. The companies said Monday they expect the deal to close in mid-2022.

The deal marks a sea change in AT & T’s leadership after it spent a year fighting to buy Time Warner, since it was renamed WarnerMedia, to create a vertically integrated empire of both content and distribution. The company that fought so hard for brands like CNN, HBO, and Warner Bros. just a few years ago is now ready to let them go.

The change highlights how quickly the media landscape has changed, as people shift away from pay TV and toward streaming video services in record numbers. Competition for those subscribers is fierce, accentuated by the launch of Disney’s fast-growing platform and the continued growth of Netflix.

Meanwhile, AT&T faces new competition in its core business, as T-Mobile and Sprint merged in 2020 to form a more formidable competitor alongside Verizon, and the three companies are competing to roll out faster 5G service for subscribers. .

AT&T CEO John Stankey alluded to the changed environment in an interview on CNBC’s “Squawk on the Street” on Monday.

“Things have changed a bit since we made the transaction,” said Stankey, who ran AT & T’s Entertainment Group at the time of the merger and was later appointed CEO of WarnerMedia before assuming his current role. “Even though we are doing this relatively quickly, shareholders have still done reasonably well with this decision.”

Here’s a look at the long road AT&T took to acquire Time Warner:

AT&T says Time Warner is ‘a perfect match’

In October 2016, AT&T announced its plans to buy Time Warner. Randall Stephenson, then AT&T CEO, called the couple “a perfect match” in a statement accompanying the statement.

AT&T touted the “complementary strengths” of the two companies, which it said would allow it to offer customers premium Time Warner content to all screens across its network.

“A big problem for customers is paying for content once, but not being able to access it on any device, anywhere. Our goal is to solve that, ”Stephenson said in a statement at the time. “We intend to provide customers with unmatched options, quality, value and experiences that will define the future of media and communications.”

AT&T positioned the deal as a win for customers, saying it would give them new options and offer more relevant content and advertising due to its insights across its network.

But Trump and his Justice Department didn’t see it the same way.

Trump opposes the deal

Former United States President Donald Trump speaks at the Conservative Political Action Conference in Orlando, Florida on February 28, 2021.

Octavio Jones | Reuters

As a candidate, Trump criticized the AT & T-Time Warner deal shortly after its announcement, saying his administration would not approve the deal “because it is too much concentration of power in the hands of too few.”

Once elected, Trump delivered on that promise. Although some experts had speculated after the election that a Republican administration would still be positive for the prospects for the deal, Trump’s Justice Department later refuted that idea by filing a lawsuit to block the merger in November 2017.

Many Democrats and antitrust experts feared that Trump’s opposition to the deal would influence the Justice Department lawsuit. Trump made no secret of his dislike of Time Warner-owned CNN, which he often positioned as his contrast when criticizing what he called “fake news.”

The top antitrust official in the Justice Department at the time, Makan Delrahim, has repeatedly denied that Trump had influence over the decision to seek to block the merger. He told CNBC in January that he “never” spoke to Trump or listened to White House officials about the case during the investigation or trial.

A fight with the DOJ

When the Justice Department sued to block the AT & T-Time Warner merger in 2017, it claimed the combination was illegal and would ultimately hurt consumers by raising prices.

Stephenson said on a conference call at the time that the lawsuit would have “nothing more than a freeze effect on trade.”

The lawsuit came shortly after the Senate approved Delrahim to head the Justice Department’s Antitrust Division. But a year before filing the lawsuit to block the case, Delrahim had told a Canadian media outlet that he did not see the combination “as a major antitrust issue.” He acknowledged that at that time there might be some concerns about one distributor owning content and its impact on other distributors.

In June 2018, United States District Court Judge Richard Leon ruled that the agreement was legal and placed no restrictions on the closing of the merger. Leon wrote that the government failed to meet its obligation to show that the agreement would substantially reduce competition.

The DOJ withdrew the lawsuit after losing on an appeal in February 2019.

Delrahim, for his part, told CNBC earlier this year that he still believes a different judge could have given him a victory.

“Sometimes different judges can reach different conclusions about the exact same set of facts. So I am convinced that we could have had a different outcome if we had a different judge in that case, “he said.

No matter

AT&T and Time Warner officially closed their merger in June 2018, prior to the Justice Department appeal.

AT&T changed the name of the media company to WarnerMedia and has since changed staffing and streaming services, including streamlining HBO’s streaming offerings.

Still, HBO has lagged behind in subscriber count compared to rivals like Netflix and Disney +. HBO and HBO Max are reported to have around 64 million global subscribers, while Netflix has around 208 million and Disney + over 100 million in about a year and a half of service.

After AT&T spent so much time fighting to acquire Time Warner, its decision to let those assets go is an acknowledgment of the new realities of broadcast wars, which seem to reward services with expanding content offerings like the deep archive of classics. loved ones of Netflix and Disney.

“My job is to make sure everything works out for the AT&T shareholder as a whole,” Stankey told CNBC on Monday, “and I think we did it here.”

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