If AT&T-Time Warner Merger Doesn’t Work Out, Telecom CEO Still Has a Plan

Randall Stephenson says he is laser focused on premium content

AT&T chief executive Randall Stephenson remains focused on winning his regulatory battle with the government over whether the telecom company will be allowed to acquire Time Warner and its media and entertainment assets.

“I don’t want to even go there,” he said when asked at the annual Code conference on Wednesday what he would do if the merger is blocked. “The judge has asked us to not say anything and that answer might have implications on how people think about the deal. But right now we’re focused on winning this thing.”

Stephenson is reliant on the lone decision of U.S. District Judge Richard Leon — expected to come June 12 — but there are experts, like University of Pennsylvania law and business professor Herbert Hovenkamp, who think the odds are not in AT&T’s favor.

The CEO couldn’t say whether AT&T had a plan B if its $85 billion proposed acquisition is blocked, but he has an idea of where the telecom company needs to go, merger or not.

“Nobody really knows what the future is going to look like five or six years from now, but I think the bet most people are making is that premium content is going to be very very relevant five or six years from now,” Stephenson said.

Media companies need to find ways to keep up with the likes of Google and Facebook — and premium content, for which customers pay, is AT&T’s clearest shot at a viable revenue stream, argued the CEO.

Stephenson said that without the vertical integration that AT&T and Time Warner are seeking with their merger (where multiple properties and brands in the supply chain are owned by the same parent company), media companies are going to have a hard time.

“This whole vertical integration of distribution all the way through the production of media and distribution and monetization of media, everybody’s headed down the same path,” Stephenson said. “People are realizing this is going to take an amazing amount of bandwidth to pump all this content and media to mobile devices.

“One of the key variables in this is you’re going to need a direct relationship with the customer, and a lot of media companies do not have that,” he continued. “There are some who do, and are doing quite well. Netflix has a direct relationship; they are a fully integrated media, distribution company.”