Potential Hurdles That Could Derail The AT&T-Time Warner Merger

AT&T generated a lot of buzz over the weekend when it revealed its plans of acquiring media conglomerate Time Warner for a hefty sum of $85.4 billion. But various industry watchers are now saying that it may be challenging for such a megamerger deal to be approved by regulators. The reason is that a similar thing has happened before, especially with the Comcast-NBC Universal deal struck about half a decade ago, and it did not work out. The concern is that the same thing could happen again.

The Comcast-NBC Universal deal was considered a vertical merger because the parties involved do not directly compete with each other. The new AT&T-Time Warner deal is also considered as such, with AT&T serving as the distributor of the media content being provided by Time Warner. This is different from AT&T’s bid to acquire T-Mobile back in 2011 because these two parties are both wireless carriers. 

Some may think that because regulators okayed the Comcast-NBC Universal back then, they would naturally be as eager to approve AT&T’s plan to acquire Time Warner. But the new merger is much larger in terms of scope and value -- at $85.4 billion, this year’s deal would dwarf the $45.2 billion merger years before. With so much at stake, regulators are right to be more careful now.

In the Comcast-NBC Universal, many of the 150 conditions set in the deal proved to be very difficult to enforce, and many now view Comcast as failing to deliver on what it had promised. Some may remember that Bloomberg had filed a lawsuit against Comcast, charging the latter for intentionally making the Bloomberg channel hard to access. According to Bloomberg, its channel was placed hundreds of channels away from the NBC Universal financial news channel CNBC, in order to give CNBC an advantage over Bloomberg. 

With the AT&T-Time Warner deal, regulators will almost certainly look into the possible conditions of the merger, and decide if both parties are capable of delivering. Regarding this, critics would be quick to point out that like Comcast, AT&T does not exactly have a perfect track record in honoring merger conditions, based mostly on past acquisitions AT&T has made in the early part of the 2000s. 

But AT&T is confident enough that the regulators will green light the deal. Randall Stephenson, the chief executive officer of the wireless carrier, seems to be reassuring everybody that by the time the merger will be approved, the wireless industry and the media market will remain unchanged, for the most part.