U.S. antitrust officials have begun talking to AT&T (T - Free Report) and Time Warner (TWX - Free Report) representatives about conditions that could allow the telecom giant to acquire the media company. This signals a shift that the government will work with the companies to ensure the merger does not harm rivals instead of stopping it from happening.
Last October, AT&T agreed to buy Time Warner for $85.4 billion in cash and stock. Under terms of the deal, shareholders will receive $107.50 per share, comprising of $53.75 in cash and $53.75 in AT&T stock.
The deal drew plenty of criticism at the time because many feared that the merger would create a media conglomerate with too much power. AT&T is the second-largest telecom operator in the U.S and the leading satellite TV operator. Time Warner is one of the six biggest media companies in the U.S., and the deal would allow AT&T to own Warner Bros. Entertainment, HBO, and TV channels like TBS and CNN.
These discussions follow a months-long review of how AT&T would affect the media landscape once it gained ownership of Time Warner. Typically, U.S. antitrust officers do not stop vertical deals like this one, but they have been under pressure to not allow this deal through.
However, antitrust lawyers are now focusing on whether AT&T could make guarantees that it wouldn’t cause problems, like using its weight to advantage its own programming.
One such condition of approving the deal would ensure that AT&T doesn’t give slower streaming speed for Netflix (NFLX - Free Report) and Amazon.com (AMZN - Free Report) users than those who use HBO. AT&T could also be required to include premium channels Showtime and Starz anywhere they sell HBO to prevent the telecom company from favoring Time Warner’s premium channel.
While this deal seems to be progressing positively for the two companies, Congressional Democrats cited the case on Monday for why their new economic plan, “A Better Deal,” and enforcement of stricter antitrust laws, are necessary.
“If AT&T succeeds in this deal, it will have more power to restrict the content access of its 135 million wireless and 25.5 million pay-TV subscribers,” the Democrats said. “This will only enable the resulting behemoths to promote their own programming, unfairly discriminate against other distributors… and further restrict small businesses.”
The merger has not been approved yet and depends on the final decision of the Justice Department in the weeks ahead.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>