AT&T CFO: Timing of Time Warner Closing ‘Now Uncertain’ as Justice Department Weighs Merger

WASHINGTON — The chief financial officer of AT&T told an investor conference on Wednesday that the timing of closure of its massive acquisition of Time Warner is “now uncertain” as the Justice Department scrutinizes the transaction.

“The timing of the closing of the deal is now uncertain,” John Stephens, senior executive vice president and CFO of AT&T, said at the Wells Fargo conference in New York. He declined to comment on the substance of the discussions with Justice Department lawyers.

Last week, the Wall Street Journal reported that the DOJ was considering a lawsuit to challenge the deal. The company has been in discussions with the DOJ, presumably about ways to approve the deal with a set of conditions. Reuters reported on Wednesday that the DOJ was looking at “structural remedies,” or asset sales to make the deal palatable.

While it is unclear what the Justice Department has been focusing on, there has been concern among rivals that AT&T could withhold Time Warner content from rivals or gain unfair leverage in carriage negotiations. In August, an economist hired by Starz unveiled a study that argued the merged firm would have the “incentive and ability” to “foreclose” HBO competitors from AT&T’s subscribers. The study was co-authored by Jeffrey Eisenach, who led Donald Trump’s transition effort at the FCC.

In a research note, Richard Greenfield of BTIG Research wrote that “despite the lack of an obvious anti-trust problem with the vertical merger of AT&T and Time Warner, it appears that the DoJ wants meaningful structural remedies to the proposed transaction – including the divestiture of HBO.”

AT&T has said they expected the merger to close by the end of the year, but the company recently extended its agreement with Time Warner as it became clear that approval would not come earlier this fall.

AT&T and Time Warner have pitched the merger as the type of vertical integration that has in the past not raised serious antitrust concerns, as opposed to a “horizontal” merger that removes competition.

But during the presidential campaign, Donald Trump said he opposed the merger, citing concentration of the news media and unhappiness with CNN. The DOJ is supposed to have a degree of autonomy from the White House as it scrutinizes the transaction. Moreover, the federal government would have to come up with a legal case to challenge the deal.

Amy Yong, an analyst at Macquarie Securities, wrote in a research note on Tuesday that its Time Warner analyst “believes that tension between CNN/President Trump should not be taken lightly.” She also noted that before he was named antitrust chief, Delrahim had said that there were few hurdles around the deal.

Meanwhile, AT&T CEO Randall Stephenson said that the company would invest $1 billion in its fiber network if Congress passes the House version of tax reform, which calls for lowering the corporate tax rate from 35% to 20%, and allows for the full expensing of capital expenditures.

“By immediately lowering the corporate tax rate to 20%, this bill will stimulate investment, job creation and economic growth in the United States,” he said.

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