AT&T Chief Attacks Lawsuit to Block Time Warner Merger
WASHINGTON — AT&T’s chief executive, Randall Stephenson, on Thursday attacked the Justice Department’s lawsuit to block its merger with Time Warner, saying that a combined company would be no different from the Silicon Valley giants that make and distribute video content.
As the last witness for the defense in the Justice Department’s legal battle against AT&T’s $85.4 billion deal to buy Time Warner, Mr. Stephenson portrayed the 140-year-old phone giant as being in an existential crisis and in need of the deal with Time Warner to compete against tech companies.
He called the blockbuster merger a “vision deal” that would allow AT&T to better match up against Facebook, Amazon, Apple, Netflix and Google, which he referred to as “F.A.A.N.G.”
“The F.A.A.N.G. are all focused on premium video,” Mr. Stephenson said, comparing the proposed merger to the businesses of tech giants. “All of them are vertically integrated.”
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The Justice Department sued to block the union of AT&T and Time Warner last November, saying it would hurt consumers who would likely see their monthly cable bills increase. The trial is being closely watched as a barometer of how the Trump Administration may treat mega-mergers, and for the implications of the case on antitrust policy and the entertainment landscape.
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The trial is expected to wrap up in coming days after rebuttal arguments by the Justice Department and closing statements by both sides. Judge Richard J. Leon of the United States District Court for the District of Columbia, who is presiding over the case, is expected to make a decision on the suit as early as the end of May.
In cross-examination of Mr. Stephenson, the Justice Department’s lead litigator, Craig Conrath, picked apart the portrayal of AT&T as under siege by Silicon Valley. Mr. Conrath said the key difference between AT&T and tech companies is that AT&T is in a powerful position as the company that provides broadband access to the internet — a service that Netflix and Amazon don’t offer.
Mr. Conrath also presented a friendly email from June 2017 between Mr. Stephenson and Mark Zuckerberg, Facebook’s chief executive, in which Mr. Zuckerberg offered to help build AT&T’s ad platform. Mr. Conrath questioned the offer of “cooperation,” suggesting there was less of a rivalry between the companies than Mr. Stephenson had said.
Mr. Stephenson dismissed the significance of the email with Mr. Zuckerberg. Mr. Zuckerberg was following up on a casual meeting the executives had during an annual media industry gathering of executives in Sun Valley, Idaho, he said.
Mr. Stephenson’s testimony followed that of Jeffrey Bewkes, the chief executive of Time Warner, on Wednesday. On the stand, Mr. Bewkes voiced similar arguments about the threats that their legacy companies face from tech companies. The executives said their deal was struck in August 2016 over a long lunch in New York where they became convinced they needed to merge.
The key disadvantage that AT&T and Time Warner face is their slow start in behavioral advertising and marketing, Mr. Stephenson said. Both companies do not collect or analyze the habits of television and web users in the same way that Comcast does with cable subscribers and that Google and Facebook do on their platforms.
Mr. Stephenson said Netflix, Amazon, Google and Facebook are all investing in premium video content to collect increasing amounts of data on users who would spend longer times on their sites and visit more often.
The AT&T chief spent much of his time talking about the history of the company. He spoke directly to Judge Leon to explain the company’s evolution from a phone company to one that seeks to make money from advertising and subscriptions for consumers who will watch much of their videos on mobile devices.
Mr. Stephenson attacked the Justice Department’s underlying theory that the company would threaten to withhold Time Warner content to raise prices on other cable and satellite distributors. He said that argument “defies logic.”
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“The value of a content company is how many people watch the content. Period,” Mr. Stephenson said.
Follow Cecilia Kang on Twitter: @ceciliakang
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