technology

AT&T CEO Randall Stephenson Prepares for the Show of a Lifetime

  • Time Warner’s Bewkes also to testify for $85 billion merger
  • Outcome could be a ‘crowning achievement’ or ride into sunset

Randall Stephenson, right, arrives at federal court in Washington, D.C., on March 22.

Photographer: Zach Gibson/Bloomberg

Two corporate titans are squaring off against U.S. regulators starting Wednesday as AT&T Inc. Chief Executive Officer Randall Stephenson and Time Warner Inc. CEO Jeff Bewkes take the witness stand in the government’s lawsuit to stop their $85 billion pay-TV merger.

Following a duel over pay-TV pricing by academics last week, it’s now up to the two CEOs to defend the deal and convince U.S. District Judge Richard Leon that the combination won’t harm consumers. Bewkes is expected to testify Wednesday, with Stephenson following on Thursday.

It’s a must-win for Stephenson, who frames owning New York-based Time Warner as way to transform AT&T into a media powerhouse that can compete with peers like Comcast Corp. and fend off challengers such as Netflix Inc., Amazon.com Inc. and Alphabet Inc.’s Google. While the arrival of the Trump administration might have stoked confidence the deal would sail through, both men find themselves in an epic struggle with the U.S. government.

“This could be the crowning achievement where it all comes together for AT&T, or, worst-case scenario, they lose and Stephenson rides off into the sunset,” said Roger Entner, an analyst with Recon Analytics LLC.

Stephenson, 57, has been a serial acquirer with 33 takeovers completed in his 11-year run as CEO, including DirecTV for $48.5 billion in 2015. The only major setback -- the $39 billion bid to buy T-Mobile US Inc. that was derailed by regulators in 2011.

The Justice Department argues AT&T’s purchase of Time Warner will give the phone giant too much control over prices and is suing to block the merger. The deal would combine Dallas-based AT&T -- the largest U.S. pay-TV provider -- with the owner of HBO, CNN and Warner Bros.

The Justice Department scored a few points last week in the trial, particularly on the pricing front, Jennifer Rie a legal analyst with Bloomberg Intelligence wrote in a note. But those didn’t stand up in a courtroom challenge where opposing testimony made the argument appear a little “complex and conjectural,” Rie wrote.

Stephenson’s vision is to create a media and TV distribution behemoth able to outrun cable TV leader Comcast and its NBCUniversal programming arm.

As not only the largest pay-TV provider in the U.S., but also the No. 2 mobile phone service, AT&T plans to deliver more shows to TVs, computers and mobile devices. The push to all screens is aimed at attracting subscribers at a time when viewers increasingly drop costly pay-TV packages for cheaper options that let them watch movies and TV shows when and where they want.

On Monday, AT&T may have found more ammunition to support its case in the financial results reported by Netflix, which posted record first-quarter subscriber growth and a 40 percent gain in revenue. Just an upstart a few years ago, the streaming service is looking more like an unstoppable force in entertainment.

“All Stephenson needs to do is point to Netflix to show how his business is under attack,” Entner said. “Netflix puts out 700 new shows a year, that’s two a day. Even a weaponized HBO couldn’t come close to competing with that.”

— With assistance by David McLaughlin, and Erik Larson

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