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AT&T Time Warner merger


22nd August, 2017

Brazil’s antitrust watchdog Cade said AT&T’s US$85.4 billion deal for Time Warner poses a high risk to competition, a potential complication that threatens to delay the final approval process.

The transaction as originally presented should be rejected unless the companies agree to some changes that may include asset sales, according to a recommendation published Tuesday by the staff of Cade. It didn’t specify what properties might need to be divested. The Cade board has until its November 22 session to issue a final ruling, though that deadline can be extended by 90 days under Brazilian law.

The merger combines one of the world’s largest telecommunications providers with the owner of media properties like Warner Bros. and HBO. It would also create a TV powerhouse in Brazil that may run afoul of a law that prohibits pay-TV providers from owning programming content. AT&T acquired a 93 percent stake in pay-TV provider Sky Brasil as part of its US$48.5 billion takeover of DirecTV in 2015, and has been ambivalent about what it will do with the unit.

“Both Sky and Time Warner have significant market power,” Cade said in a statement. AT&T disagreed with the opinion of the antitrust agency and said the Time Warner deal will bring benefits and more options for consumers. Larry Solomon, an AT&T spokesman, said the company still expects to close the deal by year end. “AT&T and Time Warner will work with Cade to clarify any issues they may have to promptly reach a final resolution on the matter,” the company said in a statement.

Brazil’s telecommunications regulator had asked Cade in June to review the deal, saying remedies should be adopted because it may negatively affect Brazil’s pay-TV market. In its report Tuesday, Cade said it’s just studying the competition effects of the merger. Competitors complaints that the deal could run afoul of a law that prohibits pay-TV providers from owning programming content would have to be analysed by other government agencies, Cade said. Representatives for Time Warner weren’t immediately available for comment.

Source: Bloomberg

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