Analysis: AT&T and Time Warner deal

The compelling question for the UK is whether the current enthusiasm for uniting distribution and content will continue to wash up on our shores, writes Raymond Snoddy

It really takes something to find an issue that Donald J. Trump and Hillary Clinton can agree on.

Finally there is such an issue – the $85.4 billion (£70 billion) deal between telecoms giant AT&T and Time Warner.

President Trump – God forbid – says his administration would block such a deal because it would concentrate too much power in too few hands.

Clinton, rather more aware that there are legal and regulatory processes for such decisions, noted that regulators should certainly look at it.

A raft of senators, Republican and Democratic, emphasised that serious anti-trust issues were involved and argued that huge media mergers usually caused harm to consumers and led to higher costs, fewer choices and a worse service.

Naturally this deal, as all the best things do, started over lunch.

Over the salmon in the office of Time Warner, chief executive Jeff Bewkes and AT&T chief executive Randal Stephenson suddenly suggested buying the media group that owns HBO, CNN and Warner Bros, according to the Wall Street Journal.

Just think of all those media brands and what they could bring to AT&T wireless and pay-TV customers.
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The deal brings history and baggage as anything involving American corporate media giants always do. The merger between AOL and Time Warner was almost certainly the most disastrous deal in world of corporate history. That too was dressed up in corporate zibber-zabber about uniting old and new media.

Rupert Murdoch’s 21st Century Fox made a pass at Time Warner but the approach was rejected because the offer was seen as too low.

Even now it is possible that Apple might make a counter-bid for Time Warner, setting off a bidding war.

The interesting question is whether this represents the firing pistol in a mega-billion merger race where two big beasts have hurtled down the track and others will be too frightened not to follow in the US and possibly in the UK?

There are fashions and trends in mergers as certain as the length of women’s skirts go up and down.

And while it is possible to make a strategic case for distributors coming together with content creators – leaving aside for the moment the regulatory issue – the reality is that few mergers are a good idea in terms of long-term wealth enhancement.

Mergers are never mergers whether they are said to be agreed, or friendly, or not. Somebody always gets swallowed up and in this case Bewkes has already said he will go when the deal is complete.

Shareholders are usually happy because of the hefty premium in the share price to get the deal done and bankers and advisers fill their boots – more than $2 billion in this case.

There will be years of disruption and thousands will inevitably lose their jobs to produce the cost-savings required and to justify the synergy driving the deal. The very least that regulators will insist on is that Time Warner makes its media products available to everyone – not just its new parent – on a non-discriminatory basis. Eventually it could all be about very little.

For the UK the compelling question is whether the current enthusiasm for uniting distribution and content will continue to wash up on our shores.

Courtesy of the collapse in the value of the pound following the Brexit vote, it is difficult to imagine that it will not. Valuable British media assets will be available at bargain basement prices.

However, there are a couple of problems. Will US broadcasters who have expanded in Britain partly because of being able to transmit from here throughout the EU be interested in further UK expansion following Brexit?

Probably if it’s content they are after.

Timing is also problematic.

Once Article 50 is triggered in March the pound will take another hit followed by a further hammering once a Hard Brexit is either chosen by the UK or enforced on it by the 27 remaining EU nations.

Why buy now when the cost of your targets keeps going down.

While European companies could come calling, the likeliest predators will come from the US.

Now that Leveson has been quietly placed in retirement and the News of the World and its inequities are a fading memory, you can bet your bottom dollar that Murdoch – who already controls 38 per cent of Sky – will go for the rest when conditions are right.

ITV has been seen as a target for so long and nothing has happened that you could be forgiven for thinking nothing ever will.

There will be a time when the price will be right for ITV but it will not come before next March at the earliest and could be delayed even further by Brexit uncertainties.

Would BT, which is increasingly interested in television, be sufficiently interested to buy ITV? Probably not, although it would almost certainly have enough dollar resources.

It’s a case of keeping a close watch – the rough water ride is only just getting under way.

Max Mosley-funded press regulator recognised as Government-backed watchdog

Meanwhile, as widely predicted, the Press Recognition Panel has decided to recognise Impress as a press regulator under Royal Charter, even though it is largely funded by Max Mosely and has no-one to regulate other than a small number of small local newspapers and websites.

What either the PRP or Impress does is largely irrelevant and will be widely ignored.

The real decision of note this week came from Culture Secretary Karen Bradley who made it clear she had no plans to go ahead with Section 40 of the Crime and Courts Act. This would have made newspapers pay the costs of all parties in a libel action even when publishers won their case.

PRP had been pushing for implementation to help persuade newspapers to seek recognition and therefore raise funds for its operation.

The Government made it clear that “punitive elements” of Section 40 would not now go ahead.

It will probably be held over the press as a stick to guarantee good behaviour in future but it can be welcomed as a small victory for press freedom.

Or if not that at least Prime Minister Theresa May has seen the wisdom of avoiding a running battle with the newspaper industry in what will be an extraordinarily difficult two years for her.