AT&T-Warner trumps lawsuit
On Tuesday, Judge Richard Leon approved AT&T’s acquisition of Time Warner Cable – a deal worth $85 billion, one of the biggest acquisitions in the 2000s.
The acquisition created a massive six-week antitrust trial, as AT&T’s massive satellite and phone networks will now have access to brands like Warner Bros., CNN, and HBO. Essentially, this acquisition will make AT&T the king of the media.
The Justice Department filed the antitrust lawsuit in November 2017, arguing that the acquisition would severely mitigate competition and raise prices for consumers. However, Leon determined that the government failed to prove that the acquisition broke any antitrust laws. In fact, the judge didn’t even add any conditions, of which he had the option.
Additionally, the approval of this acquisition will open a Pandora’s Box for other major media mergers. Namely, Comcast and Disney will go toe-to-toe in a bidding war for 21st Century Fox. After the news of the ruling, Fox’s share price rose 6%.
Plus, media giants aren’t the only ones watching. Companies in 2018 are on pace to spend over $2 trillion in acquisitions. This includes mega-mergers like Bayer-Monsanto, Sprint-T-Mobile, and Cigna-Express Scripts. With this decision, the option for mergers and acquisitions seems even more possible than before, and companies have taken notice.
According to the SEC, AT&T-Warner now has the second highest market value of all media companies, valuing at $282.4 billion. They fall only behind Amazon (though it’s not even remotely close, as Amazon’s market value is 189% higher).
Although the government believes that the merged company will have too much leverage over television distributors, consequently causing cable prices to skyrocket, AT&T and Time Warner argue the opposite. The companies explain that their leverage will only stem from viewer data, which they can use for targeted ads. This, in turn, will create more revenue, allowing the company to lower consumer prices.
The face of media is changing, and only time will tell what happens to consumers’ cable prices. The Trump administration could be correct in thinking that it will allow the merged companies to boost prices. However, AT&T-Warner may have enough power and revenue to lower consumer prices. In either case, this deal is monumental for not only the media industry, but for all US companies.
Featured image via Flickr/Mike Mozart