AT&T to buy Time Warner for $85 billion

AT&T reached an agreement to buy Time Warner for $85.4 billion. Including debt, the value grows to $108.7 billion. The deal combines the nation’s largest pay-TV provider and second largest wireless carrier with the largest entertainment company. Time Warner Entertainment is a media giant that owns HBO, CNN, TNT, TBS, Major League Baseball, and Warner Brothers, among others – as well as other lucrative properties, including “Game of Thrones” and Harry Potter.

The deal will face significant regulatory scrutiny from the Department of Justice. Consumer groups, competitors such as Disney, and elected officials have raised concerns that AT&T’s ownership of such valuable content would allow it to raise the prices it charges rivals for access to that content.

“You can imagine lots of strategies that would involve withholding content from distributors or not counting downloads of Time Warner content against data caps,” telecom analyst Craig Moffett told the New York Times. “But those things are either already expressly prohibited or will be” as a merger condition.

The Obama Department of Justice approved the Comcast-NBCU vertical merger in 2010, with tough conditions designed to prohibit Comcast from favoritism in the distribution of NBC content. But many now question whether those behavioral remedies were effective.

“Basic competition analysis would suggest approval” with strong conditions focused on prohibitions against data caps, privacy protections, and non-discriminatory access to programming and broadband, New Street Research concludes. But “changes in the market and the political climate might cause us to have to course correct our analysis.”

Recently, regulators denied a merger between Comcast and Time Warner, but approved Charter’s acquisition of Time Warner Cable – with significant public interest merger conditions, including limited data cap rates, regulated content distribution, and a reduced price broadband service for low-income families.

Links:

AT&T Is in Advanced Talks to Acquire Time Warner (Wall Street Journal, Oct. 21, 2016)

AT&T Reaches Deal to Buy Time Warner for $85.4 Billion (Wall Street Journal, Oct. 22, 2016)

Making Sense of AT&T’s Bid for Time Warner (New York Times, Oct. 23, 2016)