The $85 billion acquisition of Time Warner is not moving along as smoothly as AT&T would like. In fact, there are new warnings that the hurdles for approval of the deal may ultimately prove too steep to overcome.
Speaking at the Wells Fargo 2017 Media & Telecom Conference, AT&T CFO John Stephens acknowledged that discussions with the Antitrust Division of the U.S. Department of Justice have set back the timing for the expected close of a deal. Stephens maintained an optimistic tone about garnering eventual approval from the DOJ, but the only new information he shared about the regulatory process underway is that it's not moving as quickly as AT&T Inc. (NYSE: T) had hoped.
"All approvals have been received but for the DOJ. We are in active discussions with the DOJ. Those are continuing on. I can't comment on those discussions. But with those discussions, I can now say that the timing of the closing of the deal is now uncertain," said Stephens. "With regard to the transaction, everything continues as we've expressed in the past."
Of note, a new report by The New York Times also claims that the DOJ is demanding a sale of either Turner Broadcasting or DirecTV before it issues approval for the transaction. If that's the case, the fate of the deal would likely wind up in court.
UPDATE: On Thursday, AT&T CEO Randall Stephenson stated outright at The New York Times DealBook conference that he has no intention of selling CNN (a Time Warner property) in order to gain DOJ approval.
A hint to trouble with the DOJ emerged last week in a Wall Street Journal report that the department was exploring a possible antitrust lawsuit if it couldn't settle on suitable conditions to impose on AT&T as part of the Time Warner Inc. (NYSE: TWX) deal. According to the report, the DOJ hasn't yet made a decision on how it wants to proceed, but is instead making an effort to keep its options open. (See DoJ May Fight AT&T-TW Deal – Report.)
Meanwhile, AT&T has steadfastly maintained that there are no antitrust issues with the deal worthy of concern. As Stephens reiterated today, the transaction is a vertical merger, which means AT&T isn't scooping up a direct competitor.
"If you look at this vertical merger," said Stephens, "you can see that these types of mergers bring great benefits to customers and have very routinely been approved by the DOJ and the federal government. In fact, a vertical merger like this hasn't been blocked for over 40 years."
AT&T may be putting on a brave face, but the reality is that all executives overseeing merger deals are relentlessly optimistic... until they aren't.
We saw the same thing when Comcast Corp. (Nasdaq: CMCSA, CMCSK) attempted to acquire Time Warner Cable. The future looked delightfully rosy right up until the DOJ crushed Comcast's TWC dreams. (See What If the Comcast Merger Fails? and Comcast Formally Ends Its Bid for TWC.)
It's entirely possible the same thing may happen with AT&T.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading