AT&T-Time Warner Merger Upheld by D.C. Circuit Court

On Tuesday, a three judge panel of the D.C. Circuit Court of Appeals upheld the June 2018 decision of U.S. District Court for the District of Columbia to allow AT&T's merger with Time Warner (TW) to proceed, dealing perhaps a final blow to the Justice Department's (DOJ's) efforts to block the $85.4 billion deal.

Combining TW's extensive portfolio of media content with the reach and capabilities of AT&T's fixed and mobile broadband networks, the union of AT&T and TW was heralded by AT&T CEO Randall Stephenson at the time of the 2016 merger announcement as a "perfect match of two companies with complementary strengths." In November 2017, the DOJ Antitrust Division filed suit against the deal on grounds that it was likely "to substantially lessen competition in the video programming and distribution market nationwide by enabling AT&T to use [TW's] `must-have' television content to either raise its rivals' programming costs, or . . . drive those same rivals' customers to its subsidiary, DirecTV." Declaring, however, that the DOJ had failed to "meet its burden to establish that the proposed transaction is likely to lessen competition" and show "that the proposed merger is likely to increase [TW]'s bargaining leverage in affiliate negotiations," Senior U.S. District Court Judge Richard Leon denied the DOJ's motion to enjoin the proposed merger. AT&T and TW completed the transaction two days after Leon issued his ruling and after the DOJ agreed not to seek a stay of that ruling pending appeal.

In affirming Leon's ruling, the D.C. Circuit panel concluded that, in presenting its case at trial, the DOJ failed to offer an analysis of data regarding vertical mergers that would contradict the analysis offered by AT&T and TW. Pointing to the effects of "tectonic" marketplace changes cited in Leon's opinion, the appellate panel also cited evidence that "the industry has become dynamic in recent years with the emergence of Netflix and Hulu." Accordingly, Circuit Judge Judith Rogers wrote that, "in this evidentiary context, the government's objections that the district court misunderstood and misapplied economic principles . . . are unpersuasive."

Windstream Files for Chapter 11 Bankruptcy Protection

Faced with the effects of a New York district court ruling in favor of bondholders that had challenged a 2015 spinoff of certain network assets, Windstream Holdings--one of the nation's top providers of digital voice and broadband network services--announced on Monday that it was reorganizing under Chapter 11 of the U.S. Bankruptcy Code.

Headquartered in Little Rock, Arkansas, Windstream ranks as the ninth largest provider of residential telephone services in the U.S. and is considered a key provider of broadband network services to rural areas. In a press statement, Windstream explained that its impetus in pursuing Chapter 11 protection before the U.S. Bankruptcy Court for the Southern District of New York is to "address debt maturities that have been accelerated as a result of" the recent district court ruling against Windstream Holdings subsidiary Windstream Services, LLC. Issued on February 15, the order by Judge Jesse Furman of the U.S. District Court for the Southern District of New York holds that Windstream Services' spinoff of certain network assets into a real estate investment trust violated agreements with bondholders. As he described his company's Chapter 11 petition as "a necessary step to address the financial impact of Judge Furman's decision and the impact it would have on consumers and businesses across the states in which we operate," Windstream CEO Tony Thomas emphasized, "this proactive step will ensure that Windstream will have access to the capital and resources we need to continue building on Windstream's strong operational momentum while we engage in constructive discussions with our creditors regarding the terms of a consensual plan of reorganization."

Citing commitments his company has received for $1 billion in debtor-in-possession financing, Thomas further stressed that Windstream "will continue paying our employees, maintaining our relationships with our vendors and business partners, and serving our customers as usual." As he applauded Windstream for taking "immediate steps to ensure that it can continue to operate," FCC Commissioner Geoffrey Starks highlighted Windstream's importance as a provider of rural broadband services in declaring it "essential that [Windstream's] interests are represented and protected as the company reorganizes." As such, Starks promised, "I will be monitoring the situation closely to ensure there are no disruptions."