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AT&T Makes Concessions to Clear Merger Hurdles

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DOJ bases case on threat to competition

AT&T (T) presented a court filing in response to the DOJ (US Department of Justice) lawsuit challenging its proposed merger with Time Warner (TWX). AT&T outlined several concessions that it was willing to make to address concerns that it might destroy competition once it merges with Time Warner and its vast portfolio of media assets.

Time Warner’s Turner unit owns television channels that are important to pay-TV companies. The DOJ is opposing the merger because it believes that AT&T could burden its pay-TV rivals with programming fee hikes once it takes control of Time Warner. Higher programming prices for pay-TV companies would be passed on to consumers, the DOJ argues.

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AT&T agrees to ban blackouts and accept independent arbitration

AT&T’s proposed concessions to resolve the legal dispute with the DOJ include giving up the option to withhold channels from pay-TV distributors during programming licensing disputes. Media content providers sometimes use blackout tactics to convince distributors to accept their licensing terms.

Just a few months ago, Walt Disney (DIS) renewed its programming contracts with Altice USA (ATUS) at higher prices after a lengthy period of contentious negotiations, Reuters reported.

The other concession AT&T offered is agreeing to independent arbitration in the event of a programming impasse with pay-TV partners. AT&T, itself a leading pay-TV provider in the US (SPY), lost 385,000 pay-TV customers in 3Q17.

Dish Network (DISH), Comcast (CMCSA), and Charter Communications (CHTR) shed 129,000, 125,000, and 104,000 pay-TV customers, respectively, in the quarter.

Concessions to last seven years

AT&T is willing to commit to these concessions for seven years. This could suggest that it could overcome the DOJ’s rationale of block AT&T’s acquisition of Time Warner.

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