AT&T Defends Time Warner Deal's Synergies From U.S. Attack
(Bloomberg) -- AT&T Inc. attacked the U.S. government expert who disputes the company’s claim that its takeover of Time Warner Inc. would lead to $2.5 billion in annual cost savings, forcing him to admit on the witness stand that such a deal would probably result in efficiencies.
Rob Walters, a lawyer for AT&T, tried Monday to undermine the Justice Department’s expert, Ronald Quintero, saying he ignored AT&T’s history of successfully integrating companies and achieving projected savings. Walters also said that in a separate case in which he testified as an expert, Quintero’s testimony was “utterly discredited” by a judge.
“I’ve never heard that until just now,” Quintero responded.
AT&T is seeking to defeat the Justice Department’s antitrust lawsuit against the deal. The issue of synergies is important because any cost savings that come from the deal would mitigate the price increases that the government claims will result from the merger. If the estimates are accurate, the savings would dwarf the roughly hundreds of millions of dollars in annual price increases for consumers that the government claims will result from the merger.
Quintero, the founder of a financial consulting firm that works on mergers and valuations, testified last week that AT&T shouldn’t get credit for synergies it valued at slightly less than $2 billion.
In his cross examination of Quintero, Walters said the standard used to evaluate AT&T’s estimate of the synergies ensured they would be rejected. Quintero also didn’t contact AT&T for an explanation of its projections, he said.
Quintero conceded there was a “high degree of likelihood” that the merger would produce efficiencies for AT&T. But he defended his decision to give zero credit to the company’s projections, saying AT&T hadn’t provided sufficient documentation. Such claims can’t be “vague or speculative,” Quintero said.
The government sought to further undermine AT&T’s claimed synergies by calling to the stand professor Susan Athey, who teaches technology economics at Stanford Graduate School of Business. Athey testified that many of AT&T’s and Time Warner’s claimed synergies for advertising and content could be achieved without a merger.
“My opinion is that these synergies are neither merger-specific nor verifiable,” Athey said.
AT&T and Time Warner could reach similar deals by reaching contracts on the side, she said. U.S. District Judge Richard Leon grew weary of Athey’s responses during her cross-examination, particularly when she was asked about the use of data in advertising.
“You’re not teaching a course here; just answer the question,” Leon said.
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