Approval for AT&T and Time Warner to proceed with their $85 billion merger could be the start of a wave of media industry consolidation.
Telecommunications giant AT&T is on its way to becoming a telecom-media giant, now that a federal judge has ruled its $85 billion takeover of media conglomerate Time Warner can proceed with no conditions. The deal is expected to close by the end of the month. It is the latest effort by a big telecom company to amass media assets. The deal will give AT&T a treasure trove of content, as Time Warner owns major brands such as HBO, Warner Bros. and CNN, among others.
In November, the Justice Department filed a suit to block the deal on the grounds that it would limit competition and lead to higher prices. Opponents have similarly argued that it will further consolidate the country’s telecom and media industry. AT&T and Time Warner countered that the tie-up will allow them to compete with companies like Amazon and Netflix in the streaming media market.
When the AT&T-Time Warner ruling was announced on June 12, shares of other companies involved in mergers rose – and more mergers and acquisitions are anticipated in its wake. Executives at several major companies have been waiting on the outcome of AT&T’s bid before pushing ahead with their own deals. Now it is believed that both Comcast and Disney will bid for most of 21st Century Fox’s television assets. Sinclair Broadcast Group’s acquisition of Tribune Media could also move forward.
One of the reasons that the contention around this deal has garnered so much attention is that it is a vertical merger, meaning the two companies do not produce competing products: One makes media content, and the other distributes it, as the New York Times explains. Or as Harvard Business Review describes the relationship, they “occupy different rungs in the media industry supply chain.” The AT&T-Time Warner deal could be compared to the acquisition of insurer Aetna by CVS, or that of Whole Foods by Amazon. Such vertical merger deals are usually approved. Regulators are generally more concerned with horizontal mergers, which can move into antitrust territory. This was a notable exception.
