Trump and Clinton camps raise concerns over AT&T-Time Warner deal
Rupert Neate www.theguardian.com
Company bosses celebrate ‘perfect match’, but deal could face regulatory hurdles as Republican warns against purchase and Democrats voice skepticism
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the Guardian
The US telecoms giant AT&T has agreed to buy Time Warner, the owner of the Harry Potter and Batman film franchises as well as HBO, CNN and Cartoon Network, for $85.4bn (£70bn), creating a new media behemoth that will control both content and its distribution.

The deal has prompted political concern. On Saturday, the Republican presidential nominee, Donald Trump, promised to block it because it would “destroy democracy”. On Sunday, Hillary Clinton’s running mate, Tim Kaine, said he was “pro-competition”.

The companies’ bosses announced late on Saturday night that they had signed a deal – the biggest corporate takeover of the year – which was a “perfect match” of firms to “bring a fresh approach to how the media and communications industry works”.

The deal, unanimously approved by both companies’ boards, values Time Warner at $107.50 a share – a 20% premium on its closing price on Friday. It unites a historic phone company that traces its roots back more than 130 years to Alexander Graham Bell, the inventor of the telephone, with the producer of some of the world’s most popular movies and TV shows, including Veep and Game of Thrones.

AT&T and Time Warner would have combined market value of more than $310bn. If the deal goes through and the companies aren’t forced to sell assets, it would have AT&T’s assets of more than 130 million mobile phone customers and 25 million pay-TV subscribers through DirecTV, which AT&T bought for $50bn in 2015, as well as Time Warner’s extensive collection of Hollywood movies and TV channels and productions. Time Warner owns Warner Brothers (Harry Potter and Batman) as well as HBO, CNN and DC Comics. It also holds a 10% stake in the streaming service Hulu.

Randall Stephenson, AT&T’s chief executive, who will lead the combined company, said the corporate tie-up would transform consumers’ experience of watching media on their phones at a time when many young people are giving up on pay TV.

“We believe premium content is always going to win,” he said, on a late night conference call announcing the deal. “That’s been true on the big screen, the TV screen and we believe it is true on the mobile screen.

“When we combine Time Warner content with our scale and distribution … we’re going to have something really special.”

The deal faces the prospect of a tough battle with politicians and regulators fearful that such a tie-up could lead to less consumer choice, higher prices and a possible threat to media plurality.

Trump has vowed to block the deal if he wins next month’s election. In a speech in Gettysburg, Pennsylvania, on Saturday, he said it would give the combined company “too much concentration of power”.

Speaking about his continuing battle with the “dishonest mainstream media”, Trump said: “They’re trying desperately to suppress my vote and the voice of the American people.

“As an example of the power structure I’m fighting, 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.”

Trump said he would also consider “breaking” up the last big media deal, Comcast’s acquisition of NBC Universal in 2013. “Deals like this destroy democracy,” he said.

On Sunday, Peter Navarro, a senior adviser to Trump, said the deal was evidence of the “monopoly power of media conglomerates”. “AT&T, the original and abusive “Ma Bell” telephone monopoly, is now trying to buy Time Warner and thus the wildly anti-Trump CNN,” Navarro said. “Donald Trump would never approve such a deal because it concentrates too much power in the hands of the too and powerful few.”

Hillary Clinton did not immediately comment but she has promised to bring in tougher scrutiny on big corporations. Earlier this month she vowed to “strengthen anti-trust enforcement and really scrutinise mergers and acquisitions, so the big don’t keep getting bigger and bigger”.

Kaine told NBC’s Meet the Press on Sunday: “I’m pro-competition. Less concentration, I think, is generally helpful, especially in the media.”

Clinton spokesman Brian Fallon later told reporters there were “a number of questions and concerns” about the deal but said that more needed to be known “before any conclusions should be reached.”

Al Franken, a Democratic senator for Minnesota and regular critic of other cable and media tie-ups, said: “I’m skeptical of huge media mergers because they can lead to higher costs, fewer choices and even worse service for consumers.”

Senators Mike Lee and Amy Klobuchar, the Republican chair and ranking Democrat on the Senate subcommittee on antitrust, said in a joint statement: “An acquisition of Time Warner by AT&T would potentially raise significant antitrust issues, which the subcommittee would carefully examine.”

A spokesman for Lee later said a hearing would be held sometime this year.

The US Department of Justice and the Federal Communications Commission are also likely to review the deal, which comes shortly after cable provider Comcast took full control of NBC Universal. It is expected that the combined AT&T/Time Warner group will have to promise to provide competitor content the same access to its customers as its own content.

Disney executives have called for “very close regulatory scrutiny” of the deal.

Stephenson, who said he hoped the deal would be completed next year, said he did not expect any significant challenge from regulators as AT&T is not buying up a direct competitor but adding to its business by purchasing a supplier.

“This is not a horizontal deal. This is vertical merger,” he said. “You would be hard-pressed to find examples where vertical mergers have been blocked.”

Craig Aaron, president of the consumer watchdog Free Press, said the deal would concentrate a “huge amount of media power under one corporate umbrella” and would likely lead to less customer choice and higher prices.

“We’ll hear lots in the months ahead about supposed benefits, but history shows that mega-deals like this lead to higher prices, fewer choices and too much power in too few hands,” he told the Guardian.

“Wall Street pushes these deals for short-term gains but they’re ultimately bad for business, larger economic growth and especially content creators and consumers. This deal will be a huge test about whether the next president is serious about antitrust. If they are, they’ll move to block this deal.”

Richard Greenfield, a media and technology at research firm BTIG, said the deal showed that Time Warner believes “the entire legacy media world is headed [for] secular decline”.

He said Jeff Bewkes, Time Warner’s chairman and chief executive, would end up being remembered as “the smartest CEO in sector – knowing when to sell and not overstaying his welcome to maximize value for shareholders”.

Bewkes, who turned down an $85-a-share takeover approach from 21st Century Fox two years ago, said he would stay with the company for a handover period before stepping down. He said he also expects all of his company’s creative and business executives to stay on “for a number of years”.

The deal comes as telecoms companies are desperately trying to buy up entertainment content to differentiate themselves from competitors and prevent themselves from becoming just “dumb pipes”, providing content from other companies. AT&T’s biggest rival, Verizon, is in negotiations to buy Yahoo and has already bought AOL, owner of the Huffington Post.

The AT&T-Time Warner deal is on another level, and Stephenson said the company would become the first US mobile phone company to directly compete with cable TV companies by providing a bundle of online video content similar to a pay-TV package.

In their announcement of the deal, the two companies said: “It will disrupt the traditional entertainment model and push the boundaries on mobile content availability for the benefit of customers.”

The world’s biggest media companies

Comcast

The world’s biggest media conglomerate, according to the 2016 Forbes Global 2000 list, has annual revenue of $74.5bn, a market value of $153bn and more than 150,000 employees. The Philadelphia-based company supplies cable to 40 states and DC and also owns NBC Universal, owner of one of the US’s “big three” TV networks and Universal Studios and its theme parks.

Walt Disney

Founded by Walter Elias “Walt” Disney in 1923, the company most famous for Mickey Mouse has become a conglomerate covering TV, movies and theme parks. It has a market value of $150bn and annual sales of $54bn. As well as Walt Disney Studios, it owns the broadcast TV network ABC and several cable networks, including Disney Channel, ESPN and A+E Networks.

21st Century Fox

The Murdoch family company, formed when the news assets and entertainment assets of News Corp were split in 2013, has a market value of $48bn. Its assets include the 20th Century Fox film studio, the Fox television network, the Asian pay-TV channel STAR TV and a 39.14% stake in Sky TV.

CBS

Formerly known as Columbia Broadcasting System, CBS is worth $26bn and makes annual revenue of $13.9bn. Another of the big three US TV networks, it also owns Showtime and The Movie Channel and CBS Radio.

Viacom