A federal judge issued a ruling Tuesday afternoon that could fundamentally reshape one of the most influential companies in Texas.
Judge Richard Leon said telecom giant AT&T will be able to merge with Time Warner after all, despite opposition from the Trump administration.
The $85 billion merger means CNN, HBO and Wonder Woman (a product of Time Warner-owned D.C. Comics) will all fall under the umbrella of AT&T, which is based in downtown Dallas.
Mitchell Schnurman, business columnist for The Dallas Morning News, explains the economic implications of this landmark deal.
On the impact on North Texas
What it means for Dallas is a little unclear. I say that because these operations are generally headquartered in southern California, in the Los Angeles area, where HBO and a lot of that is, but then also in New York. That’s where the big advertising business is. So we’re not really sure yet exactly how much of it will come down here. I imagine over time it’s going to be a very positive development.
How the decision changes AT&T’s future
Just terrifically. AT&T was in a bit of a jam because it bought DirecTV in 2015, paid a lot of money for it. And DirecTV has been declining because of the big cord-cutting. But meanwhile, when all these customers have been switching, AT&T’s profits have been falling pretty steadily. So it needed a solution for that problem. And the solution is by adding content, it’s going to double down on trying to reach this audience in the future, and then also adding advertising. They believe that can get anywhere from three to five times more per ad spot because they know so much more about you. They’ll be able to tailor ads to you. So that’s partly how they’re going to make this pay off.
On opposition from the White House
It is very unusual for the government to challenge this kind of a merger. So AT&T, to its credit, it just plowed ahead and argued the case on the merits, which are the traditional arguments, which is that in a vertical merger, we don’t eliminate a competitor. There are a lot efficiencies to be gained, there are a lot of innovations that could happen up there. AT&T argued that it would do it — the $15 skinny bundle, the new advertising platform that doesn’t exist right now. Those are examples of innovations that end up bringing products to consumers for less money.
Interview responses have been lightly edited for clarity and length.