“The content and creative talent at Warner Bros., HBO and Turner are first-rate. Combine all that with AT&T’s strengths in direct-to-consumer distribution, and we offer customers a differentiated, high-quality, mobile-first entertainment experience,” AT&T Chairman and CEO Randall Stephenson said in a statement. “We’re going to bring a fresh approach to how the media and entertainment industry works for consumers, content creators, distributors and advertisers.”
Jeff Bewkes, the chairman and CEO of Time Warner which includes Warner Bros, Turner and HBO, has agreed to remain with the company as a senior advisor during a transition period, AT&T said. The units will now be part of AT&T’s Media business under entertainment boss John Stankey.
“Jeff is an outstanding leader and one of the most accomplished CEOs around. He and his team have built a global leader in media and entertainment. And I greatly appreciate his continued counsel,” Stephenson said.
The Media business will get a new name.
The merger consummates a deal announced in October 2016 that was met with fierce criticism from then-candidate Donald Trump, who condemned the combination as an example of the media “power structure” that has been working to suppress his vote and the voices of his supporters.
The Justice Department mounted an 18-month long evaluation of the deal, initially asking AT&T divest either CNN’s parent company, Turner Broadcasting, or its DirectTV service, to win approval. When the telecommunications giant refused, the DOJ brought an antitrust suit, arguing the deal was bad for competition and for consumers.
Federal district court Judge Richard Leon on Tuesday soundly rejected the DOJ’s legal arguments, saying the government had failed to prove consumers would pay higher prices to watch Turner content (evidence suggested the merger would result in hundreds of millions of dollars in savings) or that AT&T would charge rival distributors for Turner’s “must have” content (the evidence showed distributors have operated successfully without the Turner networks).
Leon urged the government to consider the “irreparable harm” that would result if it attempted to stay the merger, pending an appeal of his decision. The Department of Justice agreed to allow the deal to close while it continues to evaluate grounds for a possible appeal.
Stephenson once again made his case for combining one of the nation’s largest telecommunications companies, the leading pay TV provider and one of the marquee Hollywood studios. He said the new AT&T is poised to capitalize on the dramatic transformation in how video is distributed, paid for and viewed.
Now, comes the hard part. The success of the merger will hinge on execution.
“The long term impact will depend on AT&T’s ability to leverage Time Warner’s content to differentiate its bundles while tapping into the addressable advertising opportunity,” wrote UBS analyst John Hodulik.
AT&T will consist of three business units, in addition to the media group: AT&T Communications, which includes its mobile, broadband and video services, AT&T International, providing mobile services in Mexico and pay-TV services in 11 countries in South America and the Caribbean, and AT&T’s advertising and analytics business, which will draw customer insights from AT&T’s television, mobile and broadband services and use it to sell targeted advertising on Tuner.
Under terms of the agreement, Time Warner shareholders received 1.4 shares of AT&T common stock, in addition to $53.75 in cash, for every Time Warner share.