AT&T CEO Randall Stephenson said the Justice Department’s announcement yesterday that it is appealing the court ruling that allowed the telecom giant to absorb Time Warner “changes nothing” about the company’s post-merger plans for its newly acquired media assets.
“This changes nothing we’ll be doing over the next 30 days or the next 12 months. We’re about executing our plan. We think the likelihood of this thing being reversed and overturned is really remote,” Stephenson told CNBC in an interview Friday. “The merger is closed. We own Time Warner.”
The DOJ has lodged an appeal with the U.S. Court of Appeals for the District of Columbia Circuit, challenging U.S. District Judge Richard Leon’s June 12 ruling that let the $85.4 billion AT&T-Time Warner deal go through, without conditions.
Leon rejected the government’s argument that the vertical merger, which gave AT&T ownership of HBO and CNN, among others, would hurt competition, raise prices for consumers and give AT&T too much power in carriage negotiations.
The agency did not seek a stay following the decision, allowing the merger to close just two days later on June 14.
Since closing the deal AT&T has raised the price of its DirecTV Now service from $35 to $40 per month. The company has also made additional acquisitions to bolster its entertainment and advertising business, including scooping up ad tech firm AppNexus for a reported $1.6 billion.
In a statement regarding the appeal, AT&T General Counsel David McAtee said, “The Court’s decision could hardly have been more thorough, fact-based, and well-reasoned. While the losing party in litigation always has the right to appeal if it wishes, we are surprised that the DOJ has chosen to do so under these circumstances. We are ready to defend the Court’s decision at the D.C. Circuit Court of Appeals.”
What legal grounds the DOJ will stake its appeal on are still unknown, but Wells Fargo analysts indicate the decision may be “more noise than fundamental threat.”
“Based on conversations with our regulatory contacts, the move is viewed more about the DOJ earning political capital than necessarily wanting to unwind the T/TWX merger,” Wells Fargo Senior Analyst Jennifer Fritzsche wrote in a Friday research note. “However, one contact suspected that while the DOJ doesn’t want to unwind the deal in its entirety, the goal might be to require the sale of its Turner assets.”
One company that stands to benefit from the Justice Department’s latest move is Walt Disney Co., according to MoffettNathanson media and telecom analyst Craig Moffett, who in a blog post Thursday called the appeal a “clear gift” to Disney.
Disney is pursuing 21st Century Fox’s entertainment assets in a $71.3 billion deal, but has faced competition from Comcast. Fox has reportedly been hesitant about Comcast as a buyer, in part, because of perceived higher regulatory risk than a Disney deal.
In June, Disney secured the go-ahead from the Justice Department in June, on the condition it divest Fox’s 22 regional sports networks.
Comcast is also in the midst of a bidding war with Fox for control of European pay TV giant Sky. This week Comcast raised its bid for Sky to about $34 billion (£14.75 per share), in response to Fox’s raised bid earlier in the day to about $32.5 billion (£14.00 per share).
“Tonight’s appeal from the DOJ would seem the final nail in the coffin for Comcast’s Fox chase (their pursuit of Sky is another matter),” Moffett wrote. “And, perversely, that’s great news for Comcast. Overpaying for Fox would have been awful for their shareholders. Overpaying for Sky would also be awful for shareholders, but at least it’s a smaller deal. Overpaying for both would have been worst of all.”