(Bloomberg) -- A Cox Communications Inc. executive said an AT&T Inc. takeover of Time Warner Inc. would give the combined company undue leverage in programming negotiations and could siphon away subscribers.
Suzanne Fenwick, a vice president of content acquisition for the cable company, testified Thursday that the $85 billion acquisition could lead to an "ugly" outcome for Cox during programming negotiations. If the two sides can’t reach an agreement and Time Warner’s Turner programming such as CNN isn’t available, Cox will bleed subscribers because the content is must-have, she said.
“We can’t replace the content," she said in Washington court. "Customers will leave."
Fenwick was the Justice Department’s first witness in its lawsuit seeking to block the merger. The government says the transaction would reduce competition and raise costs for pay-TV subscribers across the country by more than $400 million a year.
The government argues Time Warner would give AT&T bargaining leverage over rival pay-TV companies during programming negotiations. Before the merger, Time Warner would worry about losing subscribers if it couldn’t reach a deal with distributors. But AT&T’s incentive would be different, the Justice Department says. That’s because some subscribers would switch to AT&T’s DirecTV business if if they can’t get Turner programming.
On cross examination, Fenwick acknowledged that she hadn’t done an analysis of how many subscribers would actually leave Cox. AT&T’s lawyer, Daniel Petrocelli, said during questioning she hadn’t done “a single bit of homework.”
Petrocelli pressed Fenwick on why AT&T would have an incentive to pull content from cable companies like Cox because it would lose more money in lost subscriber and advertising revenue than it would gain in additional customers.
Fenwick disagreed there was no incentive.
“They would if it pushed us out of business,” she said.
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