AT&T Acquires Time Warner
15th June this year in 2018, AT&T Inc. acquired Time Warner Inc. after a federal judge’s decision to favour the acquisition deal. AT&T finally purchased the media company for $85 billion after it first announced plans back in 2016. AT&T, also known as American Telephone and Telegraph company, as name suggests is a mobile provider company established far back as 1880.
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The Department of Justice tried to rebuff the acquisition November last year, claiming that the acquisition will be unfavorable to the television industry and its consumers.
They also argued that the deal will prompt an increase in television prices and also slimming down choices for consumers. However, the acquisition process was furthered without conditions when the US District Judge Richard J. Leon rejected the Department’s stance after six weeks of trial.
The deal meant a lot to the business world as it led to the “vertical” merger of one of the nation’s largest mobile phone and home broadband provider with one of the largest TV provider in the nation which included the Turner Broadcasting. Time Warner’s assets include Warner Bros, HBO, CNN, DC Comics, Audience and many more.
However, few months after the acquisition was completed,concerns have been raised about the deal and the fact that AT&T might bring down some of Time Warner’s content for its own has been a “question mark”. The Department of Justice has decided to appeal to the Court’s decision. As it stands, the acquisition is done and dusted and the appeal does not really look like an appeal but a request to un-merge the two companies. It seems that their major concern is promoting healthy competition and protecting consumers.
The argument that prices should be favour able to consumers and this criterion is used to determine if a merger or acquisition is healthy which means that an increase in price of services will be an indicator of an unhealthy merger.
The Department of Justice claimed that the deal will add up more fee, summing up to about $400 million,to cable subscribers but AT&T countered the claims saying that the merger will cut down consumer prices by $500 million. Some activists and public groups have also backed the decision to appeal.
Department of Justice’s stance was politically motivated. The company also made it known that it had agreed to an arbitration clause and shut down its channels in case of disagreement with its distributors. Although, the US President had also stated that the deal will converge power into the hands of few and further stated that his administration will not support the acquisition deal.
The reversal of the acquisition will be a loss to both companies as AT&T would have to pay up to $500 million as a merge reversal fee to Time Warner and Time Warner will lose the $85 billion deal. However, some factions, taking a cue from Comcast’s purchase of NBC Universal in 2011, believe that the acquisition deal will not cause an increase in price arguing that its perverse to think that AT&T’s acquisition will.