A key reason why: The precedent-breaking nature of the DOJ's lawsuit to prevent the deal -- while antitrust regulators have often challenged "horizontal" deals between rivals, they hadn't previously challenged a "vertical" alignment between a telecom firm and a media firm -- had cast a shadow over the corporate M&A landscape that extended well beyond the media industry. Fears about "politically arbitrary" challenges to deals have reportedly been on the minds of some tech giants.
The fact that a federal judge emphatically rejected the DOJ's suit doesn't necessarily mean tech giant will soon make 10 and 11-figure bids for companies that they were previously nervous about pursuing. However, just as the Trump Administration's arrival encouraged T-Mobile US (TMUS - Get Report) to roll the dice on a Sprint deal that still isn't guaranteed approval, the AT&T/Time Warner ruling might just make companies like Apple (AAPL - Get Report) , Alphabet/Google (GOOGL - Get Report) and Amazon.com (AMZN - Get Report) , who collectively have been restrained in their M&A activity as of late, decide the risk/reward is favorable for going after a large company operating in an adjacent field.
Netflix (NFLX - Get Report) , meanwhile, will likely be pleased if the ruling paves the way for Comcast (CMCSA - Get Report) , rather than Disney (DIS - Get Report) , to acquire the bulk of Fox Networks's (FOXA assets. Following the ruling, speculation is rife that a bidding war between Comcast and Disney will soon break out for Fox, which last fall struck a deal to sell most of its assets to Disney.
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A successful bid by Comcast would admittedly make it easier for the telecom giant to bundle streaming services featuring content from Fox and the company's NBCUniversal unit -- this could include Hulu, which NBCUniversal and Fox collectively own 60% of -- with its pay-TV, broadband and/or mobile services. However, that's arguably less of a threat to Netflix than the prospect of Disney adding family-friendly Fox material to its upcoming streaming service and leveraging Fox's many international assets to strengthen its overseas streaming footprint.
Markets certainly don't seem worried about an AT&T/Time Warner tie-up's impact on Netflix. After slipping in after-hours trading in the wake of the court ruling, possibly due to concerns about AT&T's efforts to bundle Time Warner's content with its telecom and pay-TV services, Netflix is up more than 4% in Wednesday trading and making new highs. A $100 Goldman Sachs price-target hike seems to be helping.
To the extent that the bundling of HBO and possibly other Time Warner content assets can act as a selling point for AT&T services, Verizon (VZ - Get Report) and T-Mobile might not be thrilled with the ruling. However, AT&T has been bundling HBO with unlimited wireless plans since April 2017, and has been offering free and discounted access to HBO to subscribers of its DirecTV Now online TV service since November 2016. In spite of these moves, Verizon and T-Mobile have been outperforming AT&T in terms of wireless postpaid phone subscriber adds.
Moreover, AT&T's management will have its hand full in the near-term integrating Time Warner. And between Time Warner's debt load and the fact that slightly over half of the payout to Time Warner shareholders consists of cash, the deal stands to bring AT&T's total debt balance above $200 billion. Consequently, it wouldn't be surprising to see Ma Bell restrain its telecom capital spending over the next few years -- AT&T's capex is set to rise by over $3 billion in 2018 to roughly $25 billion -- as it tries to pare its debt load.
All of that could leave Verizon and T-Mobile well-positioned to take more mobile share from AT&T. It's worth noting here that as AT&T gets set to digest a media giant, Verizon is just a few days removed from announcing that former Ericsson (ERIC - Get Report) chief Hans Vestberg will soon be its CEO. That move is widely being taken as a sign that Verizon plans to prioritize telecom/network investments relative to its online media efforts, which at best have yielded mixed results to date.
Overall, the AT&T/Time Warner ruling feels like more of a positive than a negative for big tech, and perhaps also big telecom. Some of the concerns about the competitive threat posed by an AT&T/Time Warner combo appear a little overblown, and some of the positive implications of the DOJ suit's rejection for tech and telecom firms haven't gotten enough attention.