AT&T Woos Washington Over Time Warner Deal, Schmoozes TrumpBy
Avocado tartare, cool lights and pulsing music at party
AT&T pursuing $85 billion deal that Trump called ‘too much’
AT&T Inc. would normally expect good things when a Republican administration arrives in Washington, where the company needs permission to buy Time Warner Inc. -- except the new president has already lambasted the deal.
So the search goes on for friends in high places.
At an evening reception near the U.S. Capitol, AT&T bathed lobbyists, lawyers, executives and lawmakers in cool blue light. To pulsing music in new studio space, party-goers sipped drinks, nibbled avocado tartare with melon carpaccio, and posed with a blonde in a slinky white gown who was promoting "Ice," a drama available on AT&T’s DirecTV.
The event, which AT&T called a "Stars & Stripes Reception," showcased the company’s transformation from a telephone company to a media powerhouse with $164 billion in revenue. The descendant of the stodgy Ma Bell monopoly badly wants to accelerate its metamorphosis with one of its biggest deals ever, an $85.4 billion acquisition of Time Warner, owner of HBO, CNN and the "Harry Potter” movies.
Just one problem: As a candidate, President Donald Trump cited the deal as "an example of the power structure I’m fighting." Since taking office, he’s said to have privately told people he still opposes it. Publicly he excoriates CNN for its coverage of him, and brags that he never watches. Trump will appoint officials who will vet the deal at the Justice Department.
Still, AT&T presses ahead.
It’s mobilized its army of roughly 100 lobbyists, one of the biggest and savviest corps in Washington where it has spent more than $213 million making its case since 1998, according to data compiled by the Center for Responsive Politics, a Washington-based group that tracks money in politics. The company spent $16.4 million lobbying in 2016, second only to Boeing Co. among U.S. companies, according to the center. Time Warner spent $2.9 million on lobbying over the same period.
Then there is the avocado tartare.
“All of this outreach, all of this cultivation, is ensuring you have allies,” said Meredith McGehee, strategic adviser to the Campaign Legal Center, explaining how lobbying powerhouses like AT&T get their way in Washington. “You get to know people. You invite them. You do the receptions.”
Six days before the party, Chief Executive Officer Randall Stephenson and AT&T’s top Washington executive, Bob Quinn, participated in one of the most coveted receptions of all. They dropped in on Trump at his New York tower.
But the deal didn’t come up, the company insists. Instead they steered the conversation to something they knew their host wanted to hear about: the jobs the company provides.
The theme was the same on inauguration day. “We employ more than 250,000 people,” the company said in a full-page ad in the Washington Post on Jan. 20.
“As we testified recently before Congress, the merger will create more competition for cable TV providers, giving consumers more options and accelerating next generation wireless broadband," said Michael Balmoris, a spokesman for the Dallas-based AT&T.
The soft-shoe approach comes with high stakes. Acquiring Time Warner’s content would allow AT&T to move away from dependence on slow wireless subscriber growth. It would allow it to ride a surge in demand Stephenson is sure is coming for mobile video.
So far Wall Street isn’t sure he’ll succeed: traders still are paying less for Time Warner shares than AT&T promises, even though the price has risen since the deal was announced Oct. 22. Stephenson, the CEO, said he’s confident the deal will go through because it joins companies in different businesses and leaves market shares the same in telecommunications.
In Washington, AT&T isn’t just ingratiating itself with the president whose appointees will decide if the deal lives or dies. It is building good will among lawmakers on Capitol Hill, constructing an insurance policy that may help prove Wall Street’s bears wrong.
"You start to cultivate champions on the Hill, so if an antitrust action comes about you can turn to those champions and say, ‘Hey I need you to push back. I need you to write letters,’" said McGehee, of the Campaign Legal Center.
The company’s organized giving has tilted toward Republicans, the traditional party of business interests. In the recent U.S. elections, Republican candidates got 62 percent of $2.7 million in donations to federal candidates from AT&T’s political action committee that pools contributions from employees, according to the Center for Responsive Politics.
In the company’s lobbyist corps, Republicans outnumber Democrats roughly two-to-one among those whose partisan background could be determined, according to a Bloomberg analysis of Senate records.
Firepower hasn’t always brought success for AT&T under Democratic regulation from 2009 to this January. Officials forced AT&T to abandon a $39 billion bid for smaller T-Mobile US Inc. in 2011. The FCC in 2015 proposed a $100 million fine over data speeds for wireless customers, another agency levied a $105 million penalty for faulty billing, and AT&T couldn’t stave off limits on how it uses subscribers’ data. AT&T won permission to buy satellite TV company DirecTV in 2015 after promising broadband to more homes and businesses.
‘Drain the Swamp’
Even with a change to Republicans, it’s not clear all the lobbying and contributions will help with the unconventional administration of Trump, who won the White House with a populist message and a promise his personal wealth would mean he wouldn’t be beholden to lobbyists and special interests.
Trump as a candidate said his administration would block the Time Warner deal because it made for “too much concentration of power in the hands of too few.”
The deal review is to be performed by antitrust regulators at the Justice Department, who concentrate upon competition. Telecommunications deals traditionally face a parallel review by the Federal Communications Commission, which can be tougher. But AT&T and Time Warner have said they can avoid that by not transferring any of the airwaves licenses that the FCC oversees.
Time Warner Chief Executive Officer Jeffrey Bewkes on Wednesday told investors the company is “confident the deal will be approved later this year.”
It’s possible Justice Department antitrust officials will find the combined company has significant market power to favor its own products, said Gene Kimmelman, a former antitrust official in a Democratic Justice Department. One way to resolve that is to require behavioral remedies -- such as a requirement to share programming with rivals.
“But the real question is, does the Justice Department even want to apply those conditions?" Kimmelman said. If not, regulators would have a choice to approve a deal they see as harmful, or simply ask a judge to block it. AT&T’s Stephenson has said the company would fight the Justice Department in court if necessary.
“You may find an environment in which it’s an up or down, all or nothing, antitrust review,” Kimmelman said.
That’s where a relationship with Trump can pay off.
Trump’s nominee for attorney general, Senator Jeff Sessions, an Alabama Republican, has said he’ll keep politics out of merger reviews. The administration hasn’t announced its choice for assistant attorney general for antitrust, a post that also needs Senate confirmation. The Trump team is said to be considering Joshua Wright, a law professor who promotes a laissez-fare approach to antitrust enforcement.
"It comes down to the antitrust analysis,” said Matthew Cantor, a partner at Constantine Cannon LLP in New York. “If one was to judge this deal on the merits, I think it gets through.”
— With assistance by Bill Allison, and Scott Moritz