AT&T may have to sell CNN to merge with Time Warner

AT&T may have to sell CNN to merge with Time Warner

The Department of Justice (DOJ) may require communications behemoth Time Warner to sell Turner Broadcasting, the parent company of CNN, or other significant broadcasting assets before it approves a merger with AT&T, prompting allegations that the department is punishing President Donald Trump's political adversaries.

The reported demands by Trump's DOJ come on the heels of repeated instances of the president calling CNN "fake news". The agency is concerned that AT&T's ownership of Time Warner content could raise the costs of its pay-TV rivals, according to one of the people. AT&T is still sanguine, up 0.4%.

It would, however, represent a change in stance by the head of the justice department's antitrust division, Makan Delrahim, who prior to taking office said he did not "see [the deal] as a major antitrust problem".

AT&T Inc. and US antitrust officials are fighting over whether the company should sell assets to salvage its $85.4 billion acquisition of Time Warner Inc., according to people familiar with the matter. "I can't comment on those discussions, but with those discussions, I can now say that the timing of the closing of the deal is now uncertain", he said, according to a FactSet transcript.

At an investors conference Wednesday, AT&T Chief Financial Officer John Stephens said he could not comment on discussions with Justice, which he described as ongoing.

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He did not discuss the specifics of the negotiations, which Reuters and other media outlets reported based on anonymous sources. During the same quarter in the previous year, the company posted $1.83 earnings per share. Obama-era regulators in 2011 approved a similar media merger, cable company Comcast's purchase of NBCUniversal, with a slew of requirements for Comcast's business practices attached.

On Wall Street, Time Warner fell 6.5 percent to close at $88.50, while AT&T shares jumped 1.1 percent to close at $33.44. As a candidate, Trump vowed to block the deal because it concentrated too much "power in the hands of too few". Speaking at a rally in Gettysburg, Pennsylvania, on the campaign trail a year ago, Trump said, "AT&T is buying Time Warner, and thus CNN, a deal we will not approve in my administration because it's too much concentration of power in the hands of too few". The consumer group opposes the deal and media consolidation in general. "I don't know the details here but this is worth investigating".

It's not clear if AT&T would be willing to part with anything it's acquiring from Time Warner. Several Democratic lawmakers have also pushed back against the combination.

Earlier this week, according to the insider, Justice officials told top AT&T executives that previously discussed conditions around the merger, known as a consent decree, wouldn't be sufficient to win a rubber stamp from the Trump administration without a sale. At a meeting on Monday, the DOJ told AT&T executives that either Turner or DirecTV had to go, which AT&T executives said was a non-starter, this person said.

In an interview a year ago, Makan Delrahim - now the newly-appointed head of DOJ's antitrust unit - said that the merger did not pose an antitrust issue.

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