uploads/2018/08/Telecom-2Q18-US-Pay-TV-Losses-1.png

The AT&T–Time Warner Deal Continues to Face Challenges

By

Updated

Department of Justice appeals AT&T–Time Warner deal

There’s been yet another twist in AT&T’s (T) acquisition of Time Warner: the US Department of Justice (or DOJ) has appealed Judge Richard Leon’s decision to allow AT&T to acquire Time Warner for $85.4 billion, raising the possibility that the merger could be blocked. The appeal came after the companies faced the US DOJ’s objections for six weeks in court. The DOJ argued that the merger would hurt consumers by raising costs and minimizing competition in the pay-TV market.

Article continues below advertisement

According to The Wall Street Journal, the DOJ argued that trial judge Leon disregarded “fundamental principles of economics and common sense” when he allowed AT&T to acquire Time Warner. The newspaper reported that “the department said the judge ignored the fact that corporations will do what they can to maximize profits and instead accepted without reservation the testimony of defendants’ executives.” Meanwhile, AT&T is scheduled to file its own briefing by September 20. For now, the appeal has no impact on the acquisition.

The DOJ is concerned because the acquisition could give AT&T the power to suppress competition as it would be the top content owner and pay-TV service distributor. AT&T argued that users are migrating from higher-priced traditional cable or satellite connections to more flexible and modestly priced over-the-top video streaming services.

Cord-cutting is denting AT&T’s pay-TV customer base

In the second quarter, AT&T lost 286,000 satellite TV customers and added 24,000 U-verse TV customers. Meanwhile, Comcast (CMCSA) and Charter Communications (CHTR) lost 136,000 and 73,000 residential video customers, respectively.

Advertisement

More From Market Realist