April 19, 2018 / 6:22 PM / 7 months ago

AT&T CEO Stephenson says deal needed in content-dependent world

WASHINGTON, April 19 (Reuters) - AT&T CEO Randall Stephenson said on Thursday his company’s bid to buy movie and TV show maker Time Warner would allow the two firms to serve customers better by lowering pay TV rates, rejecting government arguments the deal would raise consumer prices.

Speaking in U.S. District Court in Washington, Stephenson addressed himself to Judge Richard Leon who will decide if the $85 billion deal may go forward. He said that he wanted to combine what AT&T knew about its customers with Time Warner’s ability to create compelling content.

This would help AT&T, which owns the biggest pay TV company DirecTV, build a cheaper online product that could be partially sustained through advertising, he said.

The Justice Department has sued to block the $84.5 billion deal, saying it would hurt competition.

Stephenson’s testimony mirrors what Time Warner Chief Executive Jeff Bewkes said on Wednesday. He also argued the deal would help the companies better compete for ad dollars with internet giants like Alphabet’s Google and Facebook.

Like Bewkes, Stephenson dismissed the idea that AT&T would seek to use Time Warner content exclusively, saying the best financial strategy was to ensure it was as widely seen as possible.

Stephenson said that AT&T had initially thought to buy several small content companies - a “string of pearls” – but when that failed it decided to pursue one large company in Time Warner, a “head-snapper moment.”

He telephoned Bewkes to invite him to lunch, Stephenson said. “A quick lunch turned into a very long afternoon,” he said, as they began to discuss a deal. “We both got very excited about it.”

Under questioning by Daniel Petrocelli, a lawyer for AT&T, Stephenson sought to blunt some evidence that the Justice Department would likely bring up.

AT&T has argued that the deal would produce synergies, or reduced costs, that would balance out lost competition. Petrocelli showed Stephenson a document where he said the potential deal had “no significant cost synergies” and asked him to explain.

Stephenson said the document reflected a preliminary assessment and was incorrect. Dennis Carlton, from the University of Chicago, testified earlier in the trial that the deal would provide a net benefit to consumers of 52 cents per pay TV subscriber a month.

The government has argued that the proposed deal would spur AT&T to charge its pay TV rivals more for Time Warner content, in particular the Turner family of news and sports shows. It has also said that the combined company would have an incentive to decline to offer content to cheaper online video services in order to slow their development.

The trial, which began in mid-March , is expected to wrap up this month. (Reporting by Diane Bartz; Editing by Cynthia Osterman)

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