It’s been years in the making, but the mammoth merger of AT&T and Time Warner Inc. is officially going to happen. Judge Richard Leon, a George W. Bush appointee, handed down his decision approving the $85 billion merger with no conditions on Tuesday afternoon, following months of oral arguments and deliberations. The Justice Department sued to block the deal from going through in November of 2017, arguing that it would limit competition and raise prices. It’s unusual for the Justice Department to argue that a vertical merger of two companies that aren’t direct competitors would limit competition, but the effect that the merger will have on the telecoms and entertainment industry is significant.
Now that the merger has been approved, AT&T can fully move ahead with the merger. Short-term effects are likely to be favorable — things like a new skinny streaming service or perks like free HBO for AT&T wireless customers.
More importantly, AT&T’s victory, in this case, sets the stage for a new round of telecoms mergers. T-Mobile’s merger with Sprint is next on the block, and regulators will soon have to decide whether or not they’ll challenge that deal. Comcast is also expected to make a bid for 21 Century Fox’s television division.
With control over a significant portion of the content, AT&T is now in a good place to keep prices high among rivals and prevent streaming TV services from offering cut-price cable alternatives. With cheap home internet increasingly becoming a reality, cable companies are faced with the prospect of millions of subscribers cutting the cord over the next decade. AT&T already has a streaming service, DirecTV Now, but industry experts are dubious about whether it’s making any money at all at the $35/month price it currently sells for.
“We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner,” AT&T General counsel David McAtee said in a statement. “We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative.”
All in all, this ruling clears the way for other “vertical” mergers, which means other people who control distribution — cable guys, telco guys, tech guys — can buy content guys. Meaning less competition in the market and higher rates for families.