CI VIEW: AT&T CEO Stephenson takes on Alphabet’s Schmidt as Time Warner bid heralds new US antitrust regime UPDATE

WASHINGTON/BALTIMORE (BBN) – (Updating on September 23, 2017 to add interview of Sean “Diddy” Combs by US House Financial Services Committee Ranking Member Rep. Maxine Waters (D-Calif.) —  AT&T (NYSE: T) USD 85.4 bin dollar bid for Time Warner (NYSE: TWX) is seen marking the end of Alphabet (NYSE: Goog) and Facebook (NYSE:FB) dominant position in the US media market and heralding new antitrust action by the administration of President Donald Trump.

[21st Century Fox  and News Corp  Executive Chairman Rupert Murdoch speaks to Capitol Intelligence/Black Business News (BBN) using CI Glass on AT&T bid for Time Warner at The Wall Street Journal CEO Council Summit in Washington, DC. November 15, 2016]

The administration of Donald Trump is looking at taking long overdue antitrust action both by the US Department of Justice (DOJ) and US Federal Trade Commission (FTC) as the administration of Barack Obama gave a “free ride to Google, Facebook and Silicon Valley,” a Washington DC antitrust attorney close to the Trump transition team said.

AT&T CEO Randall L. Stephenson is reinventing AT&T into a content delivery company following its acquisition of Direct TV for USD 67 bln and the takeover of Time Warner and its main content units HBO and CNN.

Donald Trump said during the campaign he would block AT&T takeover of Time Warner, the antitrust source said Trump spoke too soon as the AT&T bid poses fewer antitrust issues as it is a vertical integration and not a takeover of another wireless carrier as AT&T’s failed bid to acquire Deutsche Telekom unit T-Mobile in 2011.

[AT&T CEO Randall Stephenson, Time Warner CEO Jeffrey Bewkes and Shark Tank Mark Cuban speak with Capitol Intelligence/BBN using CI Glass ahead of testifying at US Senate Judiciary Subcommittee on Antitrust regarding AT&T takeover of Time Warner. December 6, 2016.]
Stephenson said he sees the main driver for wireless carriers will be video on demand and the ability to have must see content on the AT&T network as opposed to recycled content on social media platforms like Youtube, Facebook, Snapchat, Instagram and twitter.

“A new Renaissance of original content is about to happen.  Everyone knows that social media biggest weakness is that it depends on others for free content.,” a top M&A media lawyer said.

In an effort to win US regulatory approval, AT&T’s Stephenson has all but decided to divest Time Warner’s Cable News Network (CNN) to CBS Corporation (NYSE:CBS). CBS, which lacks a 24-hour cable news channel but works closely with CNN through 60 Minutes, has been looking to acquire CNN for years.

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The Atlanta, Georgia-based news network founded by Ted Turner generates about USD 600m in operating profit that is not dependent on viewer ratings but on CNN’s unique status as a “must have” in all cable TV packages and strong international sales.

Insiders expected an announcement regarding the sale of CNN to CBS when CBS CEO Leslie Moonves is interviewed by The Carlyle Group Co-Founder and Co-CEO David Rubenstein at The Economic Club of Washington DC on September 7, 2017. However, CBS’ Moonves issued an almost Trumpian denial to the Capitol Intelligence story describing talk of interest by CBS for CNN as “real fake news.”

[CBS Chairman and CEO Leslie Moonves interviewed by The Carlyle Group co-Founder and co-CEO David Rubenstein at the Economic Club of Washington, DC. September 7, 2017]

When asked by Rubenstein regarding CNN market rumors, Moonves replies (28.20-29.29): “There was something in the paper said today at this luncheon we would announce at this luncheon the acquisition of CNN by CBS,” Moonves said on September 7, 2017, adding:
“For everybody here, especially you journalists, that is not true. A couple of months ago I am the Allen & Co conference in Sun Valley, and I do an interview with CNBC, and they said — it was right when people are talking about the AT&T Time Warner merger and the President might allow it because he is unhappy with CNN. The interviewer asked me if CNN were available would guys acquire it? I said, which I say about virtually everything, sure we would be happy to take a look at it…. It has been widely rumored we are going to buy CNN. I have not had a conversation with the current management or the future management. CNN is a wonderful organization but we are not buying it. It is real fake news.

The sale of CNN by AT&T would have more to do with conditions the U.S. Department of Justice may place to approve the AT&T/Time Warner deal rather than voluntary disposal on the part of AT&T’s Stephenson.

It is understood that AT&T Stephenson has already communicated to potential buyers such as Moonves that he does not want to sell CNN.  Some have valued CNN at about USD 10bn.

Vice Media founder and CEO Shane Smith is also seen likely to make a bid to acquire CNN’s domestic HLN (formerly Headline News) channel as a direct cable distribution channel for Vice News.

[VICE CEO Shane Smith speaks with Capitol Intelligence using CI Glass at The Atlantic Washington Ideas Forum. Oct. 29, 2014]

Time Warner sources said that Vice’s Shane Smith had already made a bid for HLN but his offer was rebuffed by Time Warner CEO Steve Bewkes.

The tattooed journalist from Quebec has in a few short years transformed the Brooklyn-based VICE Media group into an over USD 2.5bn plus company, with important minority shareholders such as Rupert Murdoch’s News Corp and Hearst Corporation, TPG private equity firm and The Walt Disney Company (NYSE:DIS) jointly owned A&E.

The next American media mogul will be hip-hop artist and savvy entrepreneur Sean “Diddy” Combs with his Revolt Media & TV hip-hop music cable and film production venture.

Combs highlighted his new venture at the “Financial Services Braintrust” of US House Financial Services Committee Ranking Member Rep. Maxine Waters (D-Calif.) during the Congressional Black Caucus Annual Legislative Annual Conference on September 22, 2017.

Combs is the head of Combs Enterprises, a private equity group modeled roughly on NBA’s Earvin “Magic” Johnson‘s highly successful multi-billion PE venture, Los Angeles-based Magic Johnson Enterprises.

[Sean “Diddy” Combs interviewed by US House Financial Services Ranking Member Maxine Waters (D-Calif.) at Financial Services Braintrust during Congressional Black Caucus Annual Legislative Conference in Washington, DC. September 22, 2017]

Combs Enterprises also developed and launched the Cîroc vodka brand with the world largest alcohol group, London-based Diageo (NYSE: DEO); Enyce clothing group (ex Liz Claiborne) and has recently teamed up with actor Mark Wahlberg and Ronald Burkle of Yucaipa Companies to acquire a a majority holding in Aquahydrate, a calorie-free beverage for athletes. Burkle is a partner and co-investor of Magic Johnson Enterprises.

Mr. Combs is clearly determined to use Revolt Media & TV as the tool to tap into the estimated USD 1.5 trillion of annual African-American consumer spending that remain the core profit drivers the mainstream US media groups such as Leslie Moonves’s CBS Corporation and News Corp’s Rupert Murdoch.

Combs is also very much aware that the ultimate moguls of the hip-hop industry are not Americans but foreigners such as Vincent Bollore — chairman and CEO of the Bollore Group and owner of Universal Music through Paris-based Vivendi SA (EPA: VIV) and Warner Music owner, Russian/Ukrainian billionaire oligarch Leonard Blavatnik. Comcast (NASDAQ:CMSA) unit NBCUniversal is a minority shareholder in Combs’ Revolt TV in a deal orchestrated by Congresswoman Maxine Waters so Comcast could meet minority representation conditions for their NBCUniversal takeover in 2014.

The AT&T deal will also happen after the Trump administration appointed free market Republican Ajit V. Pai to replace Tom Wheeler as Federal Communications Commission (FCC) Chairman.  The former lobbyist, Wheeler has been consistently closer to Silicon Valley interests than those represented by traditional media owners such as 21St Century (NASDAQ: FOXA) and News Corp (NASDAQ: NWS) Executive Chairman Rupert Murdoch and minority owned media operators.

[US Federal Communication Commission (FCC) Commissioner Ajit Pai speaks with Capitol Intelligence/BBN using CI Glass on bridging the digital divide at The National Association of Regulatory Utility Commissioners (NURAC) Winter Meeting. Washington, DC. Feb 16, 2015]

Speaking to Capitol Intelligence/BBN at the Wall Street Journal CEO Council event in Washington, DC, Murdoch said the AT&T deal brings the debate regarding net neutrality – the principle that internet service providers should enable access to all content and applications regardless of the source – closer to his point of view rather than that of Google.

The U.S. FTC concluded in 2012 that Google Inc under Executive Chairman Eric Schmidt used anti-competitive tactics and abused its monopoly power in ways that harmed Internet users and rivals, the Wall Street Journal reported in March last year based on a leaked FTC report.

The report recommended that the FTC bring a lawsuit challenging three Google practices which would brought highest profile antitrust lawsuit since the DOJ sued Microsoft Corp in the 1990s and the 13-year IBM antitrust battle in 1976.

In fact, Eric Schmidt became the Washington DC lobbyist for Google founder Larry Page and Sergey Brin almost immediately after Obama took office.

[Alphabet Executive Chairman Eric Schmidt speaks to Capitol Intelligence/BBN using Google Glass at New America Foundation. Washington, DC, May 22, 2014]

There has been a revolving of Google executive at White House and Google was the second-largest largest corporate source of campaign donations to President Barack Obama and by far the biggest Silicon Valley cheerleader for Hillary Clinton.

Eric Schmidt, unlike Larry Page and Sergey Brin, is not afraid to meet the public and socialize with people who do not come from the West Coast tech world.  Schmidt is so DC savvy he was the keynote speaker at a closed press event hosted by Supreme Court Justice Ruth Bader Ginsburg at the Supreme Court and organized by the Salzburg Global Seminar in November 2014.

Late Supreme Court Justice Antonin Scalia was frequently criticized for socializing privately with business owners and others who may have or had business with the Supreme Court.

[Uber founder and former CEO Travis Kalanick with JP Morgan CEO filmed exclusively by Capitol Intelligence/BBN using CI Glass following US CEO meeting with India Prime Minister Narendra Modi at The Willard Hotel in Washington, DC. June 25, 2017]

In fact, the stock market is showing that the social media bubble as witnessed by the almost USD 50bn for Uber, USD 30bn for Airbnb and Google and Facebook’s current market caps will meet the same fate, and most probably worse, than the dot.com bubble crash of 2000.

One potential target of new antitrust initiatives by the Trump’s administration’s Department of Justice or the US FTC by the Trump administration could be USD 34bn Bloomberg LP financial news and data empire of founder and owner Michael Bloomberg.

Antitrust experts argue the Bloomberg’s could be viewed having monopoly of access to algorithmic trading platforms, regulatory news and information following the acquisition of Bureau of National Affairs, and the closed-circuit nature of its terminal chat and email systems.

[Former NYC Mayor and Bloomberg LP owner Michael Bloomberg speaks to Capitol Intelligence/BBN using CI Glass on Trump administration Antitrust action and USD 5bn Bloomberg terminal securitization at The Atlantic City Lab Baltimore event in Baltimore. August 2, 2017]

Speaking to Capitol Intelligence/BBN at a City Lab event with Baltimore Mayor Catherine Pugh, Bloomberg denied that his company could be considered a target for regulatory review.

He also denied that he sought or raised between USD 5bn to USD 10bn though the securitization of Bloomberg terminals almost a decade ago. Sources close to Bloomberg told Capitol Intelligence that Michael Bloomberg held numerous meetings with Purchase, New York-based MBIA (NYSE:MBI) and Ambac Financial Group, Inc for the terminal securitization.

By PK Semler in Washington, DC. For information please call +1-202-549-3399 or email pks@capitolintelgroup.com

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