May 3, 2018 / 11:00 PM / 21 days ago

AT&T says selling DirecTV, Turner would 'destroy' value of Time Warner merger

WASHINGTON (Reuters) - AT&T told a federal judge late Thursday it should reject any request by the U.S. Justice Department to force it to divest its DirecTV unit or Turner networks as part of approving its proposed $85.4 billion acquisition of Time Warner Inc.

FILE PHOTO: A combination photo shows the Time Warner shares price at the New York Stock Exchange and AT&T logo in New York, NY, U.S., on November 15, 2017 and on October 23, 2016 respectively. REUTERS/Lucas Jackson (L) and REUTERS/Stephanie Keith/File Photos

The publication of the closing briefs from both sides brings to end the trial over a deal which took on broader political significance immediately after it was announced in October 2016.

President Donald Trump, a frequent critic of Time Warner’s CNN network, attacked the deal on the campaign trail last year, vowing that as president the Justice Department would block it.

Last week, a Justice Department attorney said Judge Richard Leon should consider requiring AT&T to make a “partial divestiture.”

The Justice Department had urged AT&T last year to divest either DirecTV, the largest pay TV company with more than 20 million subscribers, or TimeWarner’s Turner networks because the government said AT&T could use Time Warner content as a “weapon” to raise prices.

The Justice Department had demanded divestitures because it argued that ATT would have the ability to raise prices on Time Warner content for pay TV rivals. 

“Divestitures here would destroy the very consumer value this merger is designed to unlock. Divesting DirecTV would eliminate the price decrease for millions of DirecTV consumers predicted by the government itself, and divesting Turner would eliminate the content innovations and the advertising benefits that put downward pressure on Turner prices,” the company said in a court filing.

Leon is expected to decide by June 12 whether to approve the merger. The Justice Department has said it is illegal because consumers would end up paying more for television while AT&T and Time Warner say they need the deal to compete with internet titans like Facebook Inc and Netflix Inc

“The government did not even begin to make a credible case that the merger would likely harm competition, substantially or even just a little,” AT&T said in its closing brief. “This is not a close case. The government failed to meet its burden for multiple independent reasons.”

The Justice Department’s final brief was filed under seal late Thursday and a redacted version has not yet been made public.

The government argued the deal would mean that consumers will pay more since AT&T could elect to raise prices for Time Warner content to other pay TV companies, like Charter Communications or Cox. The Justice Department has also said that AT&T could refuse to license the content to new, cheaper online services.

AT&T, for its part, has argued that Time Warner’s licensing fees were too valuable for the company to forego. Time Warner reported better-than-expected quarterly revenue in late April, an increase of 10 percent to $3.34 billion, because of advertisers associated with college basketball games.

AT&T sought to assuage critics by offering to submit to third-party arbitration any disagreement with distributors over the pricing for Time Warner’s networks and to promise not to black out programing during arbitration. The offer is good for seven years.

Judge Leon, who asked few questions during the trial, asked witnesses several times if they felt the arbitration proposal was adequate.

Leon rejected a request by AT&T to force the Justice Department to turn over records that could have shed light on whether Trump pressured the Justice Department to try to block the deal.

Reporting by Diane Bartz; editing by Clive McKeef

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