AT&T chair and CEO Randall Stephenson, a day after the U.S. Dept. of Justice said it would appeal a federal court decision that helped clear the path to its merger with Time Warner Inc., told CNBC Friday morning that the DOJ’s action could affect another potential mega-media merger: Comcast’s pursuit of 21 Century Fox assets.
Comcast was expected to raise the ante again for certain Fox programming and studio assets pledged to The Walt Disney Co. Comcast had outbid Disney’s original $52.4 billion equity offer for the assets in June with a $65 billion all-cash proposal, only to be bested by another cash and stock offer from Disney worth $71.3 billion. The DOJ approved the Disney deal on June 27.
Speaking to CNBC’s Squawk Box on Friday from the Allen & Co. conference in Sun Valley, Idaho, Stephenson said the DOJ’s plans to appeal the Time Warner purchase came as little surprise, adding that it probably isn’t great news for Comcast’s pursuit of Fox.
“[It] probably can’t help it,” Stephenson told CNBC, according to a transcript. Stephenson said he didn’t want to speculate on the government’s motives for appealing his merger, but said it could affect the Comcast-Fox “process.”
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“You’re in a situation where two entities are bidding for an asset, and this kind of action can obviously influence the outcome of those actions,” Stephenson said. “But who knows whether that’s behind us.”
The AT&T chief stressed that the appeal process – which he speculated could take five-to-six months to complete -- will have no effect on the way AT&T and Warner Media run their businesses.
“This changes nothing,” Stephenson said. “This changes nothing we’ll be doing over the next 30 days or the next 12 months. We’re about executing our plan. We think the likelihood of this thing being reversed and overturned is really remote. It’s a very narrow path that would have to be traveled to get this thing reversed in any way. So we’re about executing our plan. The merger is closed. We own Time Warner.”
Stephenson said as part of the original agreement, AT&T would run Warner Media separately and independently, and the company has no intention of changing that.
“I mean, when you have content players who are both suppliers and customers, you just have an obligation to treat them that way anyway,” Stephenson said. “So this changes nothing about how we operate the business. It changes nothing about products we will launch. It changes nothing about other M&A we need to do like Appnexus.”
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And while the AT&T chief said the appeal could pose some problems for Comcast-Fox, he doesn’t see the same chilling effect on other potential mergers.
“If [I] were a CEO looking at media acquisitions and deals, I don’t think I would be looking at them today any differently than I did yesterday,” Stephenson said. “I think this is a process that will play itself out. But I think there is such a slim chance of this thing being altered in some way that it wouldn’t affect my thinking much at all.
But he added that most other companies shouldn’t have been looking to the AT&T-Time Warner ruling as a regulatory template in the first place, because Judge Leon’s ruling was so specific to that transaction.
AT&T has come under fire lately over how it would run Warner Media, specifically a Town Hall meeting with HBO employees where Warner Media chief John Stankey appeared to want the premium network to be more like Netflix. Stephenson said that Stankey’s message of increasing engagement is a strong one.
“At the end of the day that’s what this is all about, engaging the consumer,” Stephenson said. “Because the more engagement you have, the more opportunity you have to create value.”
More engagement could mean “pumping more content into HBO,” but it also means spreading it across AT&T’s other digital properties like DirecTV Now, WatchTV and online sites like CNN.com.
Still, the AT&T chief said the company is aware of the potential for culture clashes between Warner and other AT&T units, but added he wasn’t concerned about it.
“I’m conscious of it and we’re being very, very careful and mindful of that.” Stephenson said. “The way we’ve organized the business, it will be run separately, very independently. It’s important that we preserve the culture.”
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