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AT&T-Time Warner Judge Fires Starting Gun in the Battle Against Tech


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Approval of the deal pushes government to the sidelines and encourages media, tech and telecom companies to find partners to compete against Silicon Valley.




Antitrust approval of AT&T’s purchase of Time Warner could clear the way for a wave of deals.


As long as the big tech is the enemy, companies are pretty much free to buy, sell and trade assets to keep from falling behind. A federal judge said as much when he approved AT&T ’s T 0.50% $85.4 billion acquisition of Time Warner .


Judge Richard Leon isn’t wrong that Silicon Valley giants like Netflix , Apple and Amazon.com pose real threats to media companies. For consumers, that may mean higher prices for services they buy from AT&T and Time Warner now, all in the name of competition.


For investors, this means a wave of deals in which companies will invoke threats from tech giants as excuses to spend billions ostensibly to fight back. The first example could come quickly when Comcast decides how much to bid for assets owned by 21st Century Fox , which has agreed to sell them to Walt Disney .


The Trump administration’s Justice Department, which opposed the AT&T-Time Warner deal on the grounds that it would lead to fewer choices and higher prices for consumers, will have a tough time trying to stop the frenzy. The government may still choose to appeal the decision, though Judge Richard Leon advised it not to. But the Justice Department’s antitrust vigor is now considerably diminished.



If Judge Leon had to make this ruling even just a few years ago, the outcome would probably have been different. In 2011, he was reluctant to approve Comcast’s acquisition of NBCUniversal, a similar merging of distribution channels with media content. The deal went through only after Comcast agreed to strict conditions to protect consumers.


The ruling suggests Judge Leon is adapting to the times. Netflix, which had a market value of around $20.6 billion in 2014, is now worth $158.5 billion, surpassing the market value of all the legacy media companies. Amazon and Apple, which both have market caps bigger than every major media company combined, pose a similar problem. Though media isn’t their core business, both are spending billions to create original content, drawing top Hollywood talent away from the incumbents.


Any wave of deal making risks going out of control. Time Warner, after all, was one-half of one of the worst mergers in history when combined with AOL at the top of the tech bubble. Comcast shares fell after the decision as investors worried it would overpay for the Fox assets to beat out Disney, which has offered $52.5 billion in stock.


CBS and Viacom , whose recent merger talks have been complicated by quarrels and lawsuits, may feel renewed pressure to consolidate. That doesn’t necessarily mean with each other. Now that vertical deal-making has been blessed, Verizon or Charter Communications could seek to acquire CBS. Other assets like Lions Gate or AMC could get snapped up, too. Cash-rich tech companies could also join the party.


Judge Leon made a well-reasoned decision. Media CEOs may not do the same.



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