By Drew FitzGerald and Joe Flint
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 18, 2017).
The government review of AT&T Inc.'s $85 billion takeover of
Time Warner Inc. has reached an advanced stage, people close to the
situation said, a significant milestone in a deal that was closely
watched for signs of how the Trump administration would view large
mergers.
The deal's regulatory review has hit a late-stage point where
AT&T lawyers are discussing merger conditions with the Justice
Department, the people said. The review process has reached that
point despite a vacant seat atop the department's antitrust
division.
An approval could underscore the administration's pro-business
credentials at a time when President Donald Trump's ties with
America's CEOs are under severe stress. Two advisory panels filled
with a host of top U.S. executives disbanded this week in response
to the president's comments about the violence at a white
supremacist rally in Charlottesville, Va.
During his presidential campaign, Mr. Trump had attacked the
proposed deal. "AT&T is buying Time Warner, and thus CNN, a
deal we will not approve in my administration because it's too much
concentration of power in the hands of too few," he said. Mr. Trump
has since avoided talking publicly about the transaction but
frequently complained on Twitter about the way CNN, a unit of Time
Warner, has reported on him.
Markets are also growing more optimistic about the deal's
chances. Time Warner's share price on Wednesday was 5.2% lower than
the value of AT&T's cash-and-stock offer -- a vast improvement
from the nearly 20% discount it traded at when the deal was
announced last October. The narrowing of the gap suggests more
investors are betting the deal will succeed.
Presidents don't approve mergers -- antitrust enforcers do --
but they set the tone, in part through their appointments, for how
big industry-changing deals will be received in Washington.
The White House didn't respond to requests for comment.
Consolidation has been afoot more broadly in media. Discovery
Communications Inc. agreed to buy HGTV and Food Network parent
Scripps Networks Interactive Inc. last month, a nearly $12 billion
a deal that is partly in reaction to the bulking up of distributors
like Charter Communications Inc., which completed a $60 billion
takeover of Time Warner Cable last year, and AT&T's pending
deal. Broadcasters have been in on the action as well, with local
TV station-owning giant Sinclair Broadcast Group agreeing in May to
acquire Tribune Media.
AT&T's acquisition of Time Warner would turn the giant
telephone company into one of the world's biggest media owners,
putting CNN, HBO and the Warner Bros. film studio under the same
corporate roof as DirecTV and roughly 100 million wireless
users.
All along, executives at the companies have said the deal
wouldn't hurt competition and can actually help it, because they
have little overlap and they hope to become a rival in digital
advertising to Alphabet Inc.'s Google and Facebook Inc.
Among the topics raised in the government's review is ensuring
that AT&T doesn't discriminate or treat channels that compete
with Time Warner's content less favorably, the people close to the
situation said. For example, the government could prevent AT&T
from favoring HBO over other premium-TV brands in its marketing and
pricing, the people said.
Another issue is AT&T's control of data on customers,
especially its wireless subscribers, which could be used to target
advertising. The Justice Department has probed whether that data
should be available at a reasonable cost to rivals, the people
say.
AT&T is counting on its advertising division to fuel a
bigger share of future profits and recently hired Brian Lesser,
head of ad agency GroupM in North America, to run it .
AT&T General Counsel David McAtee said it would be
inappropriate to comment on discussions with the Justice
Department. "We respect the DOJ's confidential process, which
allows us to have candid conversations with the professionals at
the Department," he said in a statement. "As we have stated
previously, that process is on track from our perspective."
Several competitors including the Lions Gate Entertainment
Corp.'s premium programming service Starz and rival satellite
broadcaster Dish Network Corp. have raised concerns about the deal,
people familiar with the matter said.
Starz has warned that AT&T could favor Time Warner's HBO in
the way it markets the channel and sets prices for customers. After
it announced the acquisition, AT&T offered HBO free for a year
to some new video and unlimited wireless data subscribers.
Dish, which competes head-to-head with DirecTV, is worried that
AT&T owning HBO could give too much leverage to its No. 1
competitor, a person familiar with the matter said. State attorneys
general who are reviewing the deal have been exploring similar
issues, this person said.
AT&T is proceeding with confidence about the review. Last
month the company shuffled its management structure and tapped
DirecTV executive John Stankey to lead Time Warner's companies if
the deal is approved. The company said it has no plans to divest
CNN, and pledged to support the news network's editorial
independence. AT&T has also lined up its financing for the
deal, including through a $20 billion bond offering.
There are still regulatory headwinds to the AT&T-Time
Warner, including the Justice Department antitrust chief's empty
seat. AT&T executives expected the U.S. Senate to confirm
deputy White House general counsel Makan Delrahim as antitrust
chief earlier this summer, according to people familiar with the
matter. Congress kicked off a recess earlier this month, pushing
his confirmation to September at the earliest.
Mr. Delrahim said in a May Senate Judiciary Committee hearing
that he would keep politics out of the antitrust division's
decisions if confirmed. He also pledged in July to tell lawmakers
if the White House tries to improperly influence his work at the
department.
The Justice Department can still make antitrust decisions
without Mr. Delrahim, though a political appointee usually has the
final say on whether to challenge a major transaction.
An AT&T spokesman said the company is "perfectly comfortable
continuing this process with the Department of Justice, with or
without Mr. Delrahim's confirmation." A Justice Department
spokesman and Mr. Delrahim declined to comment.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Joe
Flint at joe.flint@wsj.com
(END) Dow Jones Newswires
August 18, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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