How AT&T and Time Warner defend their $85 billion mega-merger

Daniel Roberts
Senior Writer

The chief executives of AT&T (T) and Time Warner (TWX) appeared in federal court this week to make their case for the proposed $85 billion mega-merger they agreed on back in 2016, which the US Justice Department has sought to block.

Randall Stephenson of AT&T and Jeff Bewkes of Time Warner are aiming to convince Judge Richard Leon that AT&T owning Time Warner would not create an unfair advantage or hurt consumers.

Bewkes went first. In remarks on Wednesday reported by Reuters, the New York Times and others, Bewkes tried to frame Time Warner as an underdog, facing off against Silicon Valley goliaths like Facebook and Google for ad dollars. He pointed to two “tectonic changes” that have taken place in the industry: “The first one is, there’s television program being offered directly to consumers. The second is that sometimes those same companies, sometimes some other new entrants, you can now have digital advertising. And that’s different than the old television advertising, and it competes with us… It is a double whammy that is a significant one.”

The sale to AT&T, Bewkes reasoned, is necessary because, “We don’t have the tech platform, don’t have the engineers, don’t have the infrastructure” alone.

Bewkes also blasted as “ridiculous” the DOJ’s apparent concern that if AT&T owned Time Warner it would resist licensing out Time Warner television content to competitors, which would leave some consumers without access to the content. “If our channels are not in distribution we lose lots of money,” he said, according to Reuters. He gave a similar argument about the fear that AT&T would try to keep competitors from promoting HBO: “We need to have as many subscribers as we can get,” he said, Variety reported.

AT&T CEO Randall Stephenson (L) and Time Warner CEO Jeff Bewkes at a 2016 conference (AFP Photo/Glenn Chapman)

Stephenson got his turn on Thursday. He focused on the argument that the merger will be beneficial to consumers: by owning Time Warner, AT&T will make more in advertising, allowing it to lower prices in turn on products like DirecTV. He called the merger a “vision deal.”

And Stephenson, like Bewkes, addressed the fears that AT&T would use its Time Warner assets to block rival cable providers from offering the same content. “That strategy is not a good approach to creating value,” he said, according to the Washington Post.

Finally, Stephenson appeared to make a big reveal in his testimony. He shared that AT&T plans to launch a new skinny bundle, AT&T Watch, that sounds skinnier than its existing offering, DirecTV Now. It will also be cheaper than DirecTV Now.

The trial over the merger should wrap up before May.

Daniel Roberts covers tech and media at Yahoo Finance. Follow him on Twitter at @readDanwrite

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