Tech

AT&T CEO wasn't surprised when US government sued to block Time Warner deal

Key Points
  • Randall Stephenson was prepared for the DoJ's move to block AT&T's Time Warner deal, he said at the Code Conference on Wednesday.
  • He also explained that a vertically integrated company with both content and distribution is necessary to compete with the tech giants.
  • He declined to comment on AT&T's "plan B" if the deal fails to clear.
AT&T CEO: We saw DOJ suit coming
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AT&T CEO: We saw DOJ suit coming

Randall Stephenson, the CEO of AT&T, said he was not surprised when the federal government sued to stop the company's attempted acquisition of Time Warner.

"We saw it coming," Stephenson said on Wednesday at the Code Conference in Rancho Palos Verdes, California. "It was obvious that when Mr. Delrahim had been confirmed by the Senate, that we were really close to having a deal done with the DOJ and all of a sudden those talks came to a grinding halt. So we saw this coming. It wasn't like that day was a big wakeup call."

Later, he noted, "You go into a transaction like this, you step into it, you hope you never have to litigate but you step into it with the expectation that you may have to litigate."

Stephenson likened it to buying fire insurance — you don't want your house to burn down, but you know you have to prepare in case it does.

In November, the Justice Department filed a lawsuit to block the deal, arguing that it would raise prices for consumers and hurt competition. AT&T is fighting the suit and has resisted suggestions that it sell off some units to win regulatory approval. President Trump has lobbied against AT&T's purchase of Time Warner, which owns CNN, a frequent target of his attacks.

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Stephenson said he was pursuing the tie-up because AT&T believes that vertically integrated companies, which own both the content and the pipes through which the content flows, are the only way to win against tech giants like Amazon and Apple.

Media companies who distribute their content through multiple channels, like Time Warner does today, lack a "direct relationship with the customer," which makes it harder for them to sell premium content and the targeted advertising that marketers have grown to expect from online players.

Stephenson said that by combining distribution and content, a company like AT&T should be able to offer more effective ads, and thereby lower the number of ads it has to show, leading to a better experience for consumers.

DOJ urges alternative remedies in AT&T-Time Warner merger
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DOJ urges alternative remedies in AT&T-Time Warner merger

"The model has to change," he said. "Premium content consumption is going up, and advertisers love the premium content platforms, they just want it to be more targeted and more effective."

Stephenson declined to address whether the company has a plan B if the Time Warner deal is blocked. A judge will decide whether to approve it next month.