AT&T prefers easier route to Time Warner purchase

Bloomberg

AT&T Inc. and Time Warner Inc. said they can avoid having the Federal Communications Commission scrutinize their proposed merger, eliminating a significant hurdle in the path of the $85.4 billion deal that’s attracted criticism from President-elect Donald J. Trump.
“While subject to change, it is currently anticipated that Time Warner will not need to transfer any of its FCC licenses to AT&T in order to continue to conduct its business operations after
the closing of the transaction,” the companies said in a regulatory filing.
Time Warner has been looking to transfer or sell its licenses to another broadcaster for some time, according to a person familiar with the matter. Time Warner can contract with third parties instead of owning the licenses, the person said.
Avoiding the FCC could be key to the deal progressing. The FCC can be a harsher judge than the Justice Department, which is to review the transaction and has asked for detailed information, portending an in-depth antitrust investigation. The deal would combine the biggest US pay-TV and internet provider with one of the largest creators of TV programming, giving AT&T control of assets such as HBO and CNN.
AT&T says it’s in a different business than Time Warner and that the Justice Department has never denied a transaction that joins companies from different industries on antitrust grounds — that is, whether a deal reduces competition.
Reviews by the FCC consider broader factors, including whether a deal advances loosely defined public interests. In past deals, the agency has weighed such factors as speeding deployment of advanced services, ensuring that competing channels aren’t kept off pay-TV systems, and managing airwaves.
“The FCC’s review process is riddled with risk in a way that antitrust review isn’t,” Matthew Schettenhelm, a Bloomberg Intelligence analyst, said in an e-mail. The FCC’s decision effectively can’t be challenged in court, while an antitrust review always must meet a court’s legal test, Schettenhelm said. With Trump set to name new FCC leaders, that risk was likely too great, he said.
Spokesmen for each company declined to comment beyond the filing. At issue are dozens of airwaves licenses that Time Warner holds, according to a Bloomberg review of FCC databases.

LICENSE DETAILS
According to the person familiar with the matter, the licenses are used by Time Warner’s cable networks to transmit programs from where they’re made to satellites in space, then back down to pay-TV distributors who deliver them to people’s homes. One license involves a small broadcast station near Atlanta, while the others are related to internal operations and new technology has made them irrelevant, the person said.
There’s no guarantee AT&T’s efforts to avoid FCC scrutiny will succeed, one expert said. While it’s hard to judge without having details, “precedent strongly suggests that satellite uplinks must be subject to full FCC review,” said Andrew Jay Schwartzm-
an, senior counselor at Georgetown University’s law school in Washington.
If licenses have to be transferred to AT&T, it would trigger a review by the agency, which can send deals into a lengthy public hearing process, essentially killing them through delay. That dynamic helped to end AT&T’s bid to buy smaller T-Mobile US Inc. in 2011, as well as top US cable provider Comcast Corp.’s deal for Time Warner Cable Inc. last year. Trump remains opposed to the deal, Bloomberg reported Thursday, citing people familiar with the matter, though he hasn’t commented publicly on the transaction since October.
While Trump blasted the deal during the campaign, Time Warner shares have climbed 8.3 percent since the election on speculation that a Republican administration would be friendlier to the $85.4 billion merger.
Time Warner was down 11 cents to $94.98 at 12:54 p.m. today, compared with AT&T’s offer price of $107.50 a share. AT&T dropped $1.28, to $41.37. It’s unclear whether Trump would try to influence the regulatory review of the merger, either by pushing officials to impose conditions or to block the deal entirely.