CEO Randall Stephenson: 'We own Time Warner'
By Drew FitzGerald
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 14, 2018).
AT&T Inc. Chief Executive Randall Stephenson said his company won't alter its plans for running Time Warner's media assets despite a Justice Department appeal of the court decision that allowed the transaction.
"We think the likelihood of this thing being reversed or overturned is really remote," Mr. Stephenson told CNBC Friday in an interview at Allen & Co.'s annual Sun Valley, Idaho, media conference. "The merger is closed. We own Time Warner."
The Justice Department kicked off the appeals process in a two-page court filing late Thursday, sending the case to the U.S. Court of Appeals for the D.C. Circuit. U.S. District Court Judge Richard Leon ruled against the government in June, writing in a strongly worded 172-page opinion that the department had failed to prove that the combination of AT&T's television distribution system and Time Warner's popular cable channels would drive up pay-TV prices.
The June decision allowed AT&T to close its $81 billion cash-and-stock takeover of Time Warner's assets, which the company quickly renamed WarnerMedia. It also sparked a flurry of offers and deals among other media and telecom companies that continues today.
Comcast Corp. and Walt Disney Co. are now in a bidding war for certain 21st Century Fox Inc. assets, a situation that only developed after AT&T won its case, making Comcast confident its bid wouldn't face too much antitrust risk.
Judge Leon's opinion focused narrowly on the complaint against AT&T, though Mr. Stephenson said Friday that the appeals court's decision could have wider ramifications for other companies by setting legal precedent in favor of vertical mergers.
"This really could end up solidifying what the law is," he said.
Personal tensions have simmered between the two sides since the department filed its lawsuit in November. AT&T lawyers argued early in the case that political pressure might have influenced antitrust division chief Makan Delrahim's decision to sue, citing President Donald Trump's public criticism of Time Warner's CNN. Judge Leon barred them from seeking more evidence to pursue that defense and Mr. Delrahim has repeatedly rejected the claim.
Mr. Delrahim, for his part, appeared to bristle at the judge's unusual comments pressuring the department to allow AT&T to close the deal. Asked immediately after the loss whether he would seek a reversal, he said "the Constitution and the statutes allow for due process."
Under a deal struck last month to allow the transaction to close, AT&T kept its new media assets, which include HBO and the Warner Bros. studios, in a separate division walled off from its wireless and satellite operations. The agreement also required the company to keep staffing and compensation levels constant for the time being at its Turner unit, home to channels like Cartoon Network, TBS and TNT.
The agreement was designed to make it easier to pull apart the transaction should the government file and win an appeal. It also means the company isn't likely to change its integration plans during the appeals process.
Telecom analyst Craig Moffett said the government could argue that Judge Leon's opinion failed to account for the ways that the company's media and telecom units' interests are aligned, though that is no guarantee the Justice Department would win an appeal.
"One would have to assume that the odds are actually relatively low. But they are not zero," Mr. Moffett said.
Mr. Stephenson said in the CNBC interview that Mr. Moffett "has had a lot to say about this transaction; not much of it has been right so far."
The appeals process will likely take months to wind its way through court even if Justice Department lawyers seek an expedited ruling.
AT&T's defense team has included O'Melveny & Myers LLP litigator Dan Petrocelli and Sidley Austin LLP appellate expert Peter Keisler. Mr. Keisler, who served as acting attorney general under President George W. Bush, was a constant presence during the six-week district-court trial.
The case has already cost the combined media and telecom company hundreds of millions of dollars, the price for retaining several law firms and paying off bondholders to cover the delay in closing the deal. Thursday's appeal means the legal bills will climb even higher.
"The clock on legal fees has been running and it's been running on both sides," Mr. Stephenson said Friday. "So it will be a costly process at the end of the day. It doesn't really matter that much to us."
Write to Drew FitzGerald at firstname.lastname@example.org