Turner CEO Says Government ‘Clueless’ Trying to Block AT&T/Time Warner Merger

The Department of Justice says the $85 billion merger of AT&T and Time Warner would be bad for consumers and competition. And it filed a lawsuit to prove its case.

That doesn’t sit well with John Martin, CEO of Turner, a unit of Time Warner, to which Martin was CFO for nearly 10 years.

Speaking Feb. 13 Recode’s Code Media confab in Huntington Beach, Calif., Martin decried the government meddling and insinuation that the vertical merger between AT&T and Time Warner is negative.

“I think the government is clueless,” Martin said.

Vertical mergers typically involve two companies that operate at separate stages of the ladder within an industry’s supply chain. In the case of Time Warner, it largely represents content creation while AT&T represents content distribution.

“As a person who’s actually going through the process and has been in depositions, the theory of the [legal] case just makes absolutely no sense,” Martin said. “In the history of the country, what vertical merger has tilted the landscape of the competitive environment? Let me give you the answer: Zero.”

Specifically, Martin said that while merging with AT&T would “supercharge” Turner brands such as CNN, Cartoon Network, FilmStruck, Turner Sports, TNT and Turner Classic Movies, among others, since the announcement, he said AT&T has lost 1.3 million pay-TV subscribers and makes little money on previous acquisition, DirecTV. At the same time, Martin said Netflix has added 6 million domestic subscribers.

The CEO contends the government’s case fails further when looking at the market capitalization of AT&T and Time Warner since the announcement.

“They’re flat,” Martin said. “I think Amazon and Google have essentially, in terms of market cap, the equivalent of AT&T. And Facebook has added the equivalent of two times Time Warner.”

Martin said the government has nothing to worry about regarding the merger, adding the DOJ case amounts to a “massive miscalculation” of resources.

“They’re going to lose,” he said.

When asked if the government could lose while still extracting conditions, Martin said jokingly that the good thing about his comments was the fact he had no idea what he was talking.

To many observers, the merger revolves around President Trump’s immense dislike of CNN, which he has repeated characterized as a source for fake news.

Asked if he thought CNN might be sold [to assuage the DOJ and Trump] Martin said he didn’t think so – a position publicly backed by AT&T CEO Randall Stephenson.

Regardless, Martin said Time Warner units Turner, HBO and Warner Bros. would be “fine” without the merger.

“Time Warner is a pretty stable, successful company right now,” he said. “Whatever happens, happens.”

The federal trial is set to begin March 19.

 

Time Warner’s AT&T Merger Cost Skyrockets to $279 Million

AT&T’s pending $85.4 billion acquisition of Time Warner continues to generate escalating costs for the media company.

While the deal – currently held up due to a Justice Department antitrust lawsuit – is predicated in part on fiscal synergies, Time Warner Feb. 1 reported the transaction generated $279 million in costs in fiscal 2017, including $3 million in the fourth quarter, ended Dec. 31.

Subsidiaries Turner, Warner Bros. and HBO accounted annual merger costs of $73 million, $78 million and $47 million, respectively. Time Warner corporate added another $91 million to the SG&A ledger.

The bulk of the costs are related to employee retention programs, including the issuance of 5.7 million in stock to select staff, including all senior executives at Time Warner – including CEO Jeff Bewkes and Warner Bros. CEO Kevin Tsujihara, according to a regulatory filing.

The merger – announced Oct. 16, 2016 – generated $42 million in related costs in 2016.

The fees could be moot should the merger not happen. AT&T is on the hook to Time Warner for $500 million should the government kill the deal.

While speculation suggests President Trump ordered the lawsuit due to his dislike of CNN, which he calls “fake news,” the DOJ argues the merger combining AT&T’s DirecTV with Time Warner’s TNT, HBO and CNN would form a monopoly that is detrimental to consumers and competitors.

Trial date is slated for March 19.