AT&T/Time Warner deal faces a hurdle in Brazil

After being given the green light in Mexico, AT&T’s acquisition of Time Warner is coming under closer scrutiny in Brazil, relating to competition concerns.

The General Superintendence of the Administrative Council for Economic Defense (CADE) has put forward the opinion there might be a bit too much control for the US telco in the pay-TV space, considering it also controls Sky in the country. Both Time Warner and Sky have what the regulator has described as ‘considerable market power’, creating some concerns over a co-ordinated approach, potentially upsetting competition.

“After concluding the analysis of market information, the General Superintendence verified that the vertical integration, which would be resulted from the transaction, could coordinate the interests between Time Warner and Sky, the pay TV operator controlled by the AT&T Group,” the regulator said on its website.

“Both Sky and Time Warner have considerable market power. The transaction would create incentives for market foreclosure in the licensing/programming market and in the pay TV market, causing competition concerns.”

While this has been raised as a concern, what is worth noting is that creating conditions and limitations to verticalization in the sector is outside of CADE’s remit. That said, CADE has advised the deal should not be approved in its current form. The deal has been forwarded to CADE’s Tribunal for further analysis, a body which has the power to approve to disapprove the merger.

It certainly isn’t the best news possible for the AT&T team, but it was never going to be a smooth ride. AT&T managed to navigate the troubled waters in the US, caused by criticism by President Donald Trump, but there was always going to be challenges considering the colossal size of the acquisition. What is likely to be the case here is conditions presented, whether it be loosening the grip on Sky or something else, but there should be a palatable outcome for the AT&T team.

On a more positive note, the Instituto Federal de Telecomunicaciones (IFT) and the Comisión Federal de Competencia Económica (COFECE) in Mexico, have both given the thumbs up for the deal.

“We appreciate the work of both COFECE and IFT to review, analyze and approve the AT&T-Time Warner merger on its merits,” said David McAtee, General Counsel at AT&T. “The merger of our two companies will bring together the world’s best premium content with the networks to deliver that content to every screen, however customers want it.”

Neat.