AT&T CEO Randall Stephenson could be feeling a little like Casey at the Bat as he awaits a verdict on whether his company can buy Time Warner. He's down two strikes, and if he fails this time, his legacy may be sealed.
A blocked Time Warner acquisition would be the third misstep for Stephenson on transformational deals for AT&T. Regardless of the deal's merits, if Judge Richard Leon decides AT&T can't buy Time Warner, Stephenson's attempt to transform the nation's second-largest wireless provider will have proven unsuccessful yet again.
If Time Warner fails, Stephenson would go down in history as the only CEO in modern history who twice had deals of more than $35 billion blocked by government resistance. The one deal he did get through — a $67 billion purchase of DirecTV — has not been a financial success since its 2015 announcement. Combined, the failures would leave Stephenson with a checkered legacy at best.
"It's a reasonable question to ask, 'will this be a failed legacy?' if the deal doesn't go through," said Craig Moffett, an analyst at MoffettNathanson. "At the least, it would be a rather uncertain legacy."
AT&T shares haven't moved much from five years ago, when they were trading around $35. The stock is down about 13 percent in the last 52 weeks.
The AT&T-Time Warner trial is entering its fifth week, and Stephenson is set to testify this week, according to a person familiar with the matter. The Department of Justice's primary argument is AT&T could threaten to withhold Time Warner's programming from other distributors to force higher prices.
AT&T's DirecTV is a pay-TV provider that reaches more than 20 million customers. If Leon believes AT&T will threaten to withhold Time Warner programming from other video distributors, knowing customers could switch to DirecTV as an alternative, he may decide a deal wouldn't be in the best interest of consumers.
AT&T counters that the logic doesn't hold up, as the point of owning content is to get widespread distribution, which brings in affiliate fees and advertising revenue. Time Warner also has contracts with existing TV operators, locking the company into distribution deals for years to come.