U.S. pushes for possible asset sales in AT&T/Time Warner deal

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NEW YORK/WASHINGTON (Reuters) – The U.S. Department of Justice is pushing AT&T Inc (T.N) to sell assets or come up with other ways of satisfying antitrust concerns over its purchase of Time Warner Inc (TWX.N), a new and potentially costly obstacle to the U.S. No. 2 wireless carrier’s effort to buy the large entertainment company.

The AT&T logo is pictures on a building in Los Angeles, California, U.S. August 10, 2017. REUTERS/Mike Blake

The development came as a surprise to investors. Shares of Time Warner fell 3 percent to $91.75, while AT&T shares were down 0.5 percent at $32.90.

The Justice Department’s demand is likely to complicate its continuing antitrust conversations with AT&T, which said on Wednesday it was now uncertain when the $85.4 billion deal, announced in October 2016, would be completed.

AT&T had previously said the acquisition would close by the end of this year.

The Justice Department wants AT&T to suggest “structural remedies” to make the deal acceptable, a source familiar with the matter told Reuters on Wednesday.

The Justice Department did not immediately respond to requests for comment. AT&T declined comment.

AT&T wants to buy Time Warner, which owns the premium channel HBO, movie studio Warner Bros and news channel CNN, so it can bundle mobile service with video entertainment. Both companies have struggled to keep younger viewers from flocking to online services like Netflix Inc (NFLX.O) and Amazon.com Inc’s (AMZN.O) Prime Video.

The deal is opposed by an array of consumer groups and smaller television networks on the grounds that it would give AT&T too much power over the content it would distribute to its wireless customers.

U.S. President Donald Trump, who has accused Time Warner’s CNN and other media of being unfair to him, criticized the deal on the campaign trail last year and vowed that as president his Justice Department would block it.

“All approvals have been received but for the DOJ,” AT&T’s Chief Financial Officer John Stephens told a conference in New York.

“We are in active discussions with the DOJ. I cannot comment on those discussions,” he said. “But with those discussions I can now say that the timing of the closing of the deal is now uncertain.”

It not clear what AT&T and Time Warner might have to sell. It is normal for parties in a merger to be encouraged by the Justice Department to come up with their own ways to alleviate antitrust concerns that a deal might lessen competition or hurt consumers.

Stephens’ comments signal to investors that the Justice Department could sue to block or revise the merger and the company would fight in court to try to win approval, a person briefed on the matter told Reuters.

Another sticking point in discussions is the length of time that the U.S. government wants to impose conditions on what AT&T can and cannot do. Two people briefed on the talks told Reuters the government has sought as long as 10 years for such conditions while AT&T has pressed for a shorter period.

AT&T also said it would invest an additional $1 billion in the United States next year if Trump signed into law the provisions in the current House of Representatives tax bill.

“By immediately lowering the corporate tax rate to 20 percent, this bill will stimulate investment, job creation and economic growth in the United States,” said Randall Stephenson, AT&T chief executive.

Reporting by David Shepardson and Diane Bartz in Washington, Jessica Toonkel and Anjali Athavaley in New York, and Arjun Panchadar in Bengaluru; Editing by Patrick Graham and Bill Rigby

Our Standards:The Thomson Reuters Trust Principles.

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