AT&T Pitches WarnerMedia Strategy To Wall Street Analysts, Detailing Three Tiers Of 2019 Streaming Offering

CEO Randall Stephenson opened the two-hour event at Time Warner Center. He took the screening room stage after a sizzle reel played, punctuated by a special-effects shot of a Game of Thrones dragon flying directly over the head of a young AT&T mobile phone user.
Strategy is another question mark, with many analysts and media watchers wondering how WarnerMedia's streaming plans will shake out, especially with rival Disney gearing up for its own OTT milestone in 2019. On the pay-TV side, subscriber losses at DirecTV have not been compensated by gains with skinny-bundle service DirecTV Now, leaving some uncertainty about how quickly that longtime bulwark will fade and harm the balance sheet.
Court of Appeals will hear oral arguments on December 6 in the government's appeal of its antitrust lawsuit. A lower-court federal judge issued a decision last June siding firmly with AT&T, and the $81 billion deal closed within a few days. Circuit of the U.S. The D.C. The legal status of the merger also remains murky.
AT&T is delivering its post-merger pitch to a roomful of Wall Street analysts this afternoon, and shedding new light on its direct-to-consumer OTT service launching in late 2019. (Keep refreshing for updates.)
(Executives say by the end of 2019, net debt will be at two-and-a-half times adjusted earnings.) Wall Street has been skeptical of some aspects of the acquisition of Time Warner, for a few reasons. The analyst day is giving the company the chance to show off and explain its new structure to the investment community. First, the deal substantially increased the company's debt load and some analysts have wondered how the company will reach new heights when it is more concerned about paying off debt.
"Lots happened over the past year," Stephenson deadpanned in his trademark drawl, alluding to the nearly two-year odyssey (still not over) of fending off President Donald Trump's Department of Justice, who sought to block the $81 billion Time Warner merger. "That caused us to put on hold a lot of our plans. We're now in a place where we're ready and we want to share those plans with you." …
It will have an entry-level movie-focused package; a premium service with original programming and blockbuster movies; and a third service bundling content from the first two plus an extensive library of WarnerMedia and licensed content. The still-unnamed WarnerMedia streaming service will include three levels, the company said. Pricing or exact launch plans have yet to be revealed, and HBO Now has recently passed 5 million subscribers on its three-year-old HBO Now service, which is expected to continue.
It is forecasting total WarnerMedia synergies reaching a run rate of $2.5 billion by the end of 2021. The company expects to reach a run rate of about $700 million by the end of 2019, increasing to $2 billion by the end of 2020 and ramping to $2.5 billion by the end of 2021. Financially, the company expects earnings per share growth in the low single digits in 2019 as it absorbs the new content operations. About $1.5 billion of that will be cost synergies, with the remaining $1 billion resulting from additional sales opportunities, lower subscriber churn and higher advertising.
One condition of the closing is that the Turner Broadcasting unit is being kept siloed from the DirecTV and other pay-TV distribution holdings of the company, which would enable it to unwind the merger if the courts ultimately block it. While that outcome is seen as unlikely, the appeal still casts somewhat of a shadow over AT&T.” />

DOJ Blasts AT&T’s Reply To Its Lawsuit Appeal As “Revisionist” Rehash

AT&T executives have predicted a resolution by January. Circuit. A panel of three judges is expected to hear the case in the coming weeks. In June, U.S. District Court Judge Richard J. Leon handed AT&T a sweeping victory, allowing the $79 billion deal to close and warning the DOJ not to bother appealing given what he saw as the tenuousness of its argument. Later in the summer, the agency filed an appeal anyway, which is now before the D.C.
Regulators' 35-page response to AT&T's reply brief (read it HERE) is broken into chapters with headings that start "AT&T Ignores …," "AT&T Fails …" and "AT&T Mischaracterizes …"
This isn’t surprising,” the statement continued. The brief "does not remedy the economic and logical errors in the decision. In a statement summing up the reply brief, DOJ antitrust division chief Makan Delrahim called AT&T's response to the government's appellate complaint "a revisionist, 58-page summary" of Leon's opinion. “Ultimately, AT&T never resolves the district court’s erroneous rejection of the economics of bargaining and the principle of corporate-wide profit maximization, which are the basis of our appeal.”” />
In the latest salvo in the two-year-old saga of AT&T's acquisition of Time Warner — which has technically closed but still faces a legal challenge — the Department of Justice systematically blasted the company's counter-claims.
the programmer must have the type of content that can drive consumers who lose it to switch, and the distributor must earn a margin on subscribers gained from the switch. "There is no merit to AT&T’s hyperbolic contention that the economics of bargaining predicts that any vertical merger in the pay-television industry will result in higher programming prices," the DOJ brief states. The DOJ brief tackles a range of issues it sees as central to its contention that the merger is harmful to both rivals and consumers. This one does." It scoffs at AT&T's attempt in its previous brief to brush off the notion of the merged AT&T possibly being able to benefit from controlling both a major programmer, Turner Broadcasting, as well as the No. Most vertical mergers do not meet this standard. 1 satellite distributor, DirecTV. "As the government showed, for a merger to lessen competition substantially …

Government Poised To File Suit To Block AT&T-Time Warner Deal: Reports

The U.S. Department of Justice plans to file a lawsuit tomorrow to block the AT&T-Time Warner merger, according to multiple media reports this afternoon.
Although the situation has been shrouded in confusion, his department has reportedly communicated to AT&T that it would have to ditch Turner Broadcasting, including CNN, or DirecTV, in order to gain approval. The action would officially draw a line in the sand that the government has been threatening for months. Makan Delrahim, head of the DOJ's antitrust division  has recently articulated a philosophy that calls for added scrutiny of the "behavioral remedies" that allowed comparable deals like Comcast-NBCUniversal to go through under President Obama.
Time Warner shares slipped 1% to $87.69 as the news hit Wall Street, while AT&T actually gained a fraction to finish at $34.65.
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Philosophy isn't the operative word for President Donald Trump's view of the $85 billion deal. He has long assailed CNN as "fake news" and has spoken publicly against the combination and is seen as a potential factor in foiling the deal, even though the news network will continue to report on his administration regardless of its corporate ownership.