Business & Tech
    Next Score View the next score

    US said to seek sale of CNN or DirecTV in AT&T-Time Warner Deal

    An AT&T store in New York.
    Christian Hansen/The New York Times
    An AT&T store in New York.

    NEW YORK — The Justice Department has called on AT&T and Time Warner Inc. to sell Turner Broadcasting, the group of cable channels that includes CNN, as a potential requirement for approving the companies’ pending $85.4 billion deal, people briefed on the matter said on Wednesday.

    The other possible way for the merger to win approval would be for AT&T to sell its DirecTV division, two of these people added.

    AT&T’s chief executive said CNN would not be sold, according to Bloomberg News. “Throughout this process, I have never offered to sell CNN and have no intention of doing so,” Randall Stephenson said.

    Advertisement

    The demands set up a potential battle over the fate of the long-in-the-works deal that would create a colossus straddling the worlds of media and telecommunications at a time when upstarts like Netflix are disrupting traditional players in both industries.

    Get Talking Points in your inbox:
    An afternoon recap of the day’s most important business news, delivered weekdays.
    Thank you for signing up! Sign up for more newsletters here

    As originally envisioned, combining AT&T and Time Warner would yield a giant company offering wireless and broadband internet service, DirecTV, the Warner Bros. movie studio, and cable channels like HBO and CNN.

    If the Justice Department formally makes either demand a requisite for approval, AT&T and Time Warner would almost certainly take the matter to court to challenge the government’s legal basis for blocking the transaction.

    President Trump has long accused CNN of harboring a bias against him.

    Trump has criticized the proposed merger from a populist perspective. In the final weeks of the presidential campaign, he argued “deals like this destroy democracy” and cited it as “an example of the power structure” he was fighting.

    Advertisement

    While critics of the merger have described it as a sign that there is too much consolidation in the media and telecommunications industries, analysts have said that there were few legal grounds on which to block the transaction.

    At an investor conference on Wednesday, John Stephens, AT&T’s chief financial officer, said that the timing of the deal’s closing, which had been scheduled by year’s end, was now uncertain. The only remaining issue, he added, was Justice Department approval.

    “We are in active discussions with the DOJ,” Stephens said. “I cannot comment on those discussions. But with those discussions, I can now say that the timing of the closing of the deal is now uncertain.”

    Executives at both AT&T and Time Warner have privately expressed bewilderment about the request from the Justice Department. Because the proposed deal is a “vertical” merger — meaning that neither company competes directly against the other — they believe there is little legal basis to block it.

    To win approval of the deal, AT&T hired lobbyists close to Vice President Mike Pence and others in the Trump administration. AT&T was among the top donors to Trump’s inauguration.

    Advertisement

    Stephenson attended at least two meetings with Trump this year. Shortly after the first one, Trump lashed out at CNN on Twitter, saying of the news network that “their credibility will soon be gone!” After the second meeting, which was focused on emerging technologies, the president said that Stephenson was doing “really a top job.”

    Fighting the deal could prove challenging for regulators, antitrust experts said. The Justice Department would have to argue that AT&T would have an incentive to withhold Turner channels like CNN or TNT from rival broadband distributors like Verizon or Comcast.