AT&T Set to Acquire Time Warner 📺
AT&T making money moves
Yesterday, a federal judge granted AT&T permission to acquire Time Warner for $85 billion. The deal was originally announced in October 2016 but was blocked by the Justice Department on antitrust grounds, saying that it would limit competition and raise prices for consumers. AT&T is primarily a content distributor through its cable and satellite services, while Time Warner owns and creates content through its assets, including Warner Bros, HBO, CNN, TBS, etc.
Been there, done that
AT&T is all too familiar with antitrust run-ins. In 1913, the company was ordered to allow competitors to use its long-distance lines. In 1956, the company was required to license patents to competitors. By 1982, AT&T got so big that it was forced to split into several "Baby Bells". Some believe this new merger is once again allowing AT&T to get too big and powerful, while others believe the move is justified in a rapidly changing media landscape.
Anti-merger folks focus on the anti-competitive and unethical repercussions. They say the repeal of net neutrality and approval of the merger demonstrate consolidation of power among few telecom giants who will profit from consumers’ limited access to competitors. They also note that this decision will greenlight other potential mergers in the industry - making the situation worse. The sheer size of empires like AT&T creates a barrier to entry that allows them to now control your internet, cable and much of the content that flows through it.
Pro-merger folks note that this is primarily a vertical merger - where two companies within an industry merge but perform different roles in that industry. Time Warner makes the content and AT&T distributes it. As a result, they argue, the merger will not reduce competition since the two companies do not directly compete. Some pro-merger advocates also believe that the Justice Department was being driven by politics, given Trump's distaste for CNN - a Time Warner brand.
A new merger world?
Experts are noting that this deal will have implications that reach outside of the media industry - calling it "open season for vertical mergers". Large corporations that have been afraid to engage in mergers out of fear of the Justice Department will now reconsider. This could lead to a flurry of big new deals in the coming years. Some vertical deals already in the works include CVS-Aetna, Albertsons-Rite Aid, and Cigna-Express Scripts.
Media mergers everywhere!
Share this story!