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What 'regulatory credits' are — and why they're so important to Tesla

In this articleTSLATesla CEO Elon Musk speaks at a delivery ceremony for Tesla China-made Model 3 in Shanghai, east China, Jan. 7, 2020.Ding Ting | Xinhua News Agency | Getty ImagesTesla’s reliance on so-called regulatory credits to make money has been thrust back into the spotlight after a regulatory filing revealed investor Michael Burry took a $534 million bet against the electric carmaker.Burry, who was depicted in Michael Lewis’ book “The Big Short,” has a short position on the company — betting that Tesla shares will fall.In a now-deleted tweet, the famous hedge fund manager said Tesla’s reliance on regulatory credits to generate profits is a red flag.Tesla raked in $518 million in revenue from sales of regulatory credits in the first quarter of the year, helping the U.S. electric vehicle maker post another quarter of profit.What are regulatory credits? How do they work?In a push to reduce carbon emissions, governments around the world have introduced incentives for automakers to develop electric vehicles or very low-carbon emitting cars. Credits are given to carmakers that build and sell environmentally friendly vehicles.In the U.S., California and at least 13 other states have rules surrounding regulatory credits. They require auto manufacturers to produce a certain number of so-called zero-emission vehicles (ZEVs) based on the total number of cars sold in that particular state.Automakers that produce such cars will get a certain amount of credits based on factors like the range of the vehicle — longer range ZEVs get more credits.These carmakers are required to have a certain amount of regulatory credits each year. If they can’t meet the target, they can buy them from other companies that have excess credits.Because Tesla only sells electric cars which come under the ZEV category, the company always has excess regulatory credits and can effectively sell them at a 100% profit.Regulatory credits in China and EuropeIt’s not just the U.S. that has such a credit scheme. The European Union and China have similar rules.In China, the regulatory credit requirements for automakers have been steadily increasing since 2019 and will continue to do so. Chinese regulations determine the amount of credit per vehicle based on a number of factors including the range of car.Tesla will also earn these green credits in China, one of its most important markets — but one where it ran into a slew of negative publicity last month.Last month, Reuters reported that a joint venture between German automaker Volkswagen and Chinese state-owned manufacturer FAW, agreed to buy credits from Tesla in China.Tesla was not immediately available for comment when contacted by CNBC.In Europe, lawmakers have been aggressive in trying to reduce emissions from cars. In 2020, the European Union said the average CO2 emissions from cars must be no more than 95 grams per kilometer. Auto companies exceeding this could be forced to pay hefty fines.There are incentives in the form of “super-credits” for vehicles that emit less than 50 grams of CO2 per kilometer in order to push the development of low-carbon emitting vehicles.Tesla’s regulatory credit business modelSince Tesla receives all these regulatory credits for free, it can essentially sell them for a 100% profit. This has been behind its recent profitable quarters.But Burry’s concern about the carmaker’s reliance on these credits is also shared by others.In Tesla’s fourth quarter 2020 earnings call earlier this year, Tesla CFO Zachary Kirkhorn was asked for his outlook on regulatory credit sales in 2021. But he said it was difficult to predict.”What I’ve said before is that in the long-term regulatory credit sales will not be a material part of the business and we don’t plan the business around that,” he said at that time. “It’s possible that for a handful of additional quarters it remains strong. It’s also possible that it’s not.”Tesla relies on large automakers to purchase credits from it.One example is Stellantis, a company formed through the merger of France’s PSA Group and Italy’s Fiat Chrysler Automobiles. Stellantis bought about 2 billion euros ($2.43 billion) of European and U.S. green credits from Tesla between 2019 and 2021, according to Reuters.But Carlos Tavares, the CEO of Stellantis, said in an interview with French publication Le Point, that the company could meet emissions targets this year.That means it would no longer need to buy credits from companies like Tesla, and Tesla could potentially lose a key customer of its regulatory credits.

Southeast Asia's start-up scene shows increased investment potential, says venture capital firm

Southeast Asia’s start-up scene is presenting increased investment potential as the pandemic has shifted dynamics for the long-term, one of the region’s leading venture capital firms said.Despite its “devastating” impact, the downturn has provided “a lot of opportunity” for new start-ups in the region, Roderick Purwana, managing partner at Indonesia-based East Ventures, told CNBC Monday, noting that he has seen many new businesses formed during this period.In particular, new businesses related to digital adoption, including education technology, health technology and financial technology, have been a real success story, he said.With any crisis, it brings also opportunity. We’ve seen that not just in this part of the world.Roderick Purwanamanaging partner, East Ventures”With any crisis, it brings also opportunity. We’ve seen that not just in this part of the world,” Purwana told “Street Signs Asia.””We’ve seen some of the largest or most successful start-ups or tech companies are founded during this time,” he said citing previous historic downturns such as the dot-com bust and 2008 Financial Crisis. “I think this one (will be) no different.”Purwana’s comments come as Southeast Asia’s start-ups have been gaining ground on the global stage.On Monday, Indonesian ride-hailing giant Gojek announced that it had merged with e-commerce player Tokopedia to form GoTo Group. The deal is seen as a preemptive move as the company prepares to go public at an estimated valuation of $35 billion to $40 billion.Ahead of the announcement, Purwana said that valuations have become “a little bit frothy” due to recent hype around the region. Still, he said they remain “reasonable” overall, adding that it is “definitely a positive” to see homegrown names now entering the public markets.That includes public listings via special purpose acquisition companies (SPAC), which have grown in popularity across the region as across the globe. Last month, fellow regional ride-hailing giant Grab announced it would go public on the Nasdaq in a nearly $40 billion SPAC merger.”We’re seeing SPACs as an opportunity for some of these tech companies to tap the U.S. public markets,” he said. “There will probably be some correction on the noise. But in the long run, I think it’s there to stay.”

Mall operators extend relief measures

Workers spray disinfectant inside MBK shopping centre which is helping tenants by charging them for water and electricity only.

Many shopping centre operators have extended their relief measures to help enable tenants to continue with their businesses amid the unabated Covid-19 crisis.Somphol Tripopnart, managing director of shopping centre business at MBK Plc, the operator of MBK, Paradise Park and The Nine Rama 9, said the company started helping its tenants on April 26 by waiving the rental fee for the hardest-hit tenants who could not settle any of their invoices, charging them only for water and electricity.
Early this month, the company extended its relief measures to cover other tenants at all three shopping complexes by reducing the rental fee by between 30-70% to mitigate the impact of the fresh wave of Covid-19 pandemic on the tenants.
“It remains necessary to waive the rental fee for some tenants. We want to support and keep them in business until the day that the shopping sentiment gets better,” Mr Somphol said.
“If we ignore and let them get away from us, on the day that the situation is back to normal, it will be difficult for them to call their staff back.”
According to Mr Somphol, the company has also developed various sales channels to help enable tenants to raise their sales opportunities and reach new customer groups to combat the drop in their revenue. The company recently opened its shop called “MBK Center@Lazada” to help tenants sell their products online.
In addition, every Wednesday the company runs live streaming via Facebook under the page “MBK Live Market”. At the same time, the company has been calling back some spaces once the contract agreements expire this year to renovate its store.
“MBK’s new image will be visible in September this year,” Mr Somphol said.
In a related development, MBK is scheduled to officially open its new community mall “The Nine Center Tiwanon” by the middle of next month.
Food Legends By MBK, which are street food services, will also become available on May 20.
Prasert Sriuranpong, managing director of Siam Retail Development, the operator of Fashion Island, Promenade and Terminal 21, said the company has also offered a rental fee reduction by 30-70% to tenants this month.
The duration of the scheme will depend on Covid-19 infections, he said.
“We would like the government to speed up inoculations as fast as possible,” he said.
“Inoculations are instrumental to reviving the economy and consumer confidence as we’ve seen in the UK, China, the US and Singapore,” Mr Prasert said.
Paphitchaya Suwandee, chief executive officer of Megabangna shopping complex, said the company also offers support to its tenants by preparing 12 big marketing campaigns to lure customers.
The complex has also negotiated with the government body in Samut Prakan to provide vaccines for its staff and tenants.
“In light of the severity of the fresh wave of the pandemic, we’ve cancelled many big campaigns this year,” he said. “But we are ready to restart the activities once the situation improves.”

Apple exec explains the story behind the video-streaming deal cut with Amazon

In this articleAAPLApple Fellow Phil Schiller arrives at federal court on May 03, 2021 in Oakland, California.Justin Sullivan | Getty ImagesOn Monday, former Apple marketing senior vice president and current Apple fellow Phil Schiller testified that Apple does reduce its App Store fees for certain companies from 30% to 15% in exchange for them supporting Apple’s TV app.Schiller was testifying as part of a lawsuit by Fortnite maker Epic Games that is asking a judge to force Apple to allow Epic to install its own app store on iPhones and bypass Apple’s 30% App Store fee.Schiller said that a few years back, the Apple TV department was working on a way to gather video streams from various apps and integrate them all into one experience for users.The result was the Apple Video Partner Program, which allows members to take 85% of sales they make through in-app purchases, instead of paying Apple’s typical 30% fee.”The Apple TV team had a meeting with premium content providers and described the work they were going to do to integrate this new experience. For example, they had to integrate with our Siri voice assistant so we can find any show across any one of those app experiences,” Schiller said. “In talking with those developers, the Apple TV team asked if we could lower the commission to 85/15, not in the second year, but in the first year” to allow them to recoup the engineering costs of supporting the Apple features.Apple charges developers who are not part of the video partner program 15% in the second year of a subscription billed through Apple’s in-app purchases. Schiller said that any company could get the 15% cut if they join the program and do the engineering work to integrate with Apple’s TV app. It’s not only available to large media companies, Schiller said.Schiller also said that the program allowed participants to charge users directly, without using Apple’s in-app purchase feature.”When working with a number of these partners, in particular, the cable providers that are going digital, they had existing movie rental businesses installed as customers. And they asked if they could maintain those existing relationships,” Schiller said, adding that Amazon is one of the companies in the program.Much of Schiller’s testimony on Monday emphasized how much Apple invests in its developer community to maintain a competitive edge against competing app stores. Schiller said that Apple spends about $50 million per year to hold its annual developers conference and that it is building facilities for outside developers at its headquarters.Apple started to call its own witnesses, including Schiller, on Monday, and the trial is expected to run through next Monday. Schiller hasn’t been questioned by Epic Games lawyers yet.Apple and its CEO, Tim Cook, have consistently said that they treat every iPhone developer the same — the same rules for its App Store, the same commissions and the same review process.Last year, the House Antitrust subcommittee published an email showing Apple online services senior vice president Eddy Cue sending an email to Amazon CEO Jeff Bezos in 2016 about the program.”Here are the details of what we discussed on Prime Video — Amazon Prime Video app in iOS and Apple TV — 15% rev share for customers that signup using the app (uses our payment); no rev share for customers that already subscribe,” Cue wrote.Apple’s Premium Video Partner Program was widely reported in April 2020, when the Amazon Prime Video app for iPhones and Apple TV boxes was discovered to be able to charge existing Amazon customers for rentals directly through credit card data it already had — a practice that is usually banned on Apple’s App Store, including for Fortnite.An Apple spokesman said when it was first reported that it was an established program exclusively for “premium subscription video entertainment” providers including Amazon, Altice and Canal that supported Apple features such as the Apple TV app, AirPlay 2, Siri and Apple’s universal search and wanted to bill their existing customers.An internal Apple slide deck published as part of the Epic Games trial this month showed Apple employees debating whether to offer “video partner program benefits” to Netflix in 2018 when the video streamer was considering whether to discontinue using Apple’s in-app purchase software.A page on Apple’s website says the Apple Video Partner Program has existed since 2016 and has 130 participants, including Disney+, HBO Max and the Canadian Broadcasting Corporation.When the Premium Video Partner Program was first reported, Epic Games CEO Tim Sweeney told CNBC in response to the news, in a preview of its lawsuit: “Epic Games wholeheartedly supports smartphone platforms and their digital stores opening up to payment processing competition.”

Now that WarnerMedia and Discovery have tied the knot, the pressure's on ViacomCBS and NBCUniversal

In this articleCMCSAVIACShari Redstone, chairwoman of ViacomCBS and president of National Amusements, reacts as she celebrates her company’s merger at the Nasdaq Market site in New York, December 5, 2019.Brendan McDermid | ReutersIn the words of the great Tom Lehrer, “Who’s Next?”Now that AT&T has decided to separate WarnerMedia and merge with Discovery, the rest of the media world — particularly the smaller players — face new pressure to make their countermoves.Even before this deal, it was clear that Lionsgate, MGM, Sony Pictures and AMC Networks were probably too small to compete in a streaming world where success depends on a massive store of content and global reach.But ViacomCBS and Comcast’s NBCUniversal are much bigger, and probably assumed they had some time — at least a year — to see how many subscribers signed up for their streaming offerings, Paramount+ and Peacock.”Within the next two years, it’s going to be put up or shut up for all of us,” said David Zaslav, Discovery’s CEO who will take the top job at the combined company, in December. “Can you show you’re scaling? Are you going to be a player in the U.S.? Are you going to be a player around the world?”Under pressureThat timeline is shorter now.Suddenly, both ViacomCBS and NBCUniversal seem subscale as they attempt to put together global streaming services. They aren’t trying to be niche players, such as Starz or AMC+.That means both will need more content to compete against Netflix, Amazon Prime Video, Disney and whatever the new name of WarnerMediaDiscovery will be.The obvious move would be for ViacomCBS and NBCUniversal to merge. But a combined ViacomCBS/NBCUniversal would have two U.S. broadcast networks — CBS and NBC — housed under the same corporate roof. That won’t fly with U.S. regulators. While the parent companies could theoretically spin out or sell them, the broadcast networks provide so much value to both companies — and their streaming services — that it seems unlikely.Further, Shari Redstone controls ViacomCBS and Brian Roberts controls NBCUniversal through his family’s Comcast shares. Their dual class share structure is another obstacle for both companies, as it makes it hard for outsiders to pressure the companies to make changes the executives don’t favor. But it’s not a deal stopper — Discovery had several classes of shares too, but John Malone was willing to eliminate his voting shares to get a deal done with WarnerMedia.Four optionsThat leaves Comcast and ViacomCBS with four likely options.Buy. If both companies feel their streaming services can compete around the world, they can go on global and domestic acquisition sprees. It may take several deals to get to a scaled position, as they piece together smaller U.S.-based assets and larger global media companies in Latin America and Europe.Sell. They could also sell. Shari Redstone is more open to the idea of selling ViacomCBS than her father, according to people familiar with the matter. It’s unclear if Roberts would consider selling NBCUniversal. Potential buyers could include Amazon or the newly merged WarnerMedia-Discovery. Apple and Netflix continue to hover along the periphery, but neither company has ever shown much interest in making big media acquisitions.Reduce their ambitions. The third option is to throw in the towel on being a global streaming service. Instead, NBCUniversal and ViacomCBS could license their content to other, larger streamers and wind down Paramount+ and Peacock if they fail to gain global traction.Bundle. Option four is similar but less drastic. ViacomCBS and NBCUniversal could begin bundling their streaming services together or finding new streaming partners to increase global distribution through discounted offerings. The main problem with this strategy is it limits the upside for both companies, who won’t be able to compete with larger players for top content and breadth of programming.The fifth option — inaction — is no longer a viable strategy. The pressure is on Roberts, NBCUniversal CEO Jeff Shell, Redstone and ViacomCBS CEO Bob Bakish to find exciting go-forward solutions for their companies.Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.WATCH: What the WarnerMedia-Discovery deal could mean for the streaming wars

Comcast stock closes down 5.5% on Discovery, AT&T's deal

In this articleCMCSABrian Roberts, Chairman and CEO of ComcastDavid A. Grogan | CNBCShares of Comcast closed down 5.5% Monday after AT&T announced a deal to combine its content unit WarnerMedia with Discovery to form a new media giant.The new media company, which could be worth well over $100 billion, will compete against other players that have invested heavily in streaming, including Comcast’s NBCUniversal, Netflix and Disney. Netflix stock closed down nearly 1%, while Disney shed more than 2%.Executives said the two companies already spend a combined $20 billion per year on content, including programming for their linear networks, which is comparable to Netflix’s projected estimate of $17 billion spent this year.The deal also could put pressure on Comcast’s internet business. By shedding its media assets, AT&T can focus on its core connectivity business, touting the power of 5G. AT&T Chief Executive John Stankey said in a call with reporters Monday that he plans to focus his company’s capital on fiber infrastructure to improve AT&T’s 5G network, which could compete against Comcast as a home broadband alternative.”Connectivity demand is higher than ever,” an AT&T spokesperson told CNBC earlier Monday. “Especially connectivity with symmetrical upload and download speeds. This transaction allows us to step up our investment in spectrum and fiber.”As part of the deal, AT&T said it would receive an aggregate amount of $43 billion in a combination of cash, debt and WarnerMedia’s retention of certain debt.Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC.CNBC’s Alex Sherman contributed to this report.

Michael Burry of ‘The Big Short’ reveals a $530 million bet against Tesla

In this articleTSLAMichael Burry attends the “The Big Short” New York premiere at Ziegfeld Theater on November 23, 2015 in New York City.Jim Spellman | WireImage | Getty ImagesFamed investor Michael Burry on Monday revealed a short position against Tesla worth more than half a billion, in a regulatory filing.Burry, one of the first investors to call and profit from the subprime mortgage crisis, is long puts against 800,100 shares of Tesla or $534 million by the end of the first quarter, according to the filing with the U.S. Securities and Exchange Commission. Investors profit from puts when the underlying securities fall in prices. As of March 31, Burry owned 8,001 put contracts, with unknown value, strike price, or expiry, according to the filing.Shares of Tesla fell more than 4% on Monday, bringing its month-to-date losses to more than 20%.Burry, whose firm is Scion Asset Management, shot to fame by betting against mortgage securities before the 2008 crisis. Burry was depicted in Michael Lewis’ book “The Big Short” and the subsequent Oscar-winning movie of the same name.Tesla has had a turbulent 2021 amid slumping sales in China in April, and parts shortages that have impeded production both in the U.S. and China.Zoom In IconArrows pointing outwardsBurry previously mentioned in a tweet, which he later deleted, that Tesla’s reliance on regulatory credits to generate profits is a red flag.As more automakers produce battery electric vehicles of their own, ostensibly fewer will need to purchase environmental regulatory credits from Tesla, which they have done in order to become compliant with environmental regulations.Besides his “Big Short,” Burry made a killing from a long GameStop position recently as the Reddit favorite made Wall Street history with its massive short squeeze.In the first quarter of 2021, Tesla reported $518 million in sales of regulatory credits, which Elon Musk’s company generally receives from government programs to support renewable energy. It has sold these to other automakers, notably FCA (now Stellantis) when they needed credits to offset their own carbon footprint.In the fourth quarter of 2020, Tesla’s $270 million in net income was enabled by its sale of $401 million in regulatory credits to other automakers.Tesla historically racked up around $1.6 billion in regulatory energy credits, primarily zero emission vehicle credits, which helped Tesla report more than four consecutive quarters of profitability, qualifying Elon Musk’s automaker for addition to the S&P 500 index.Tesla is currently delayed in producing and delivering its updated versions of its high-end sedan and SUV, the Model S and X. And it is delayed in commercial production of its custom-designed “4680” battery cells for use in forthcoming vehicles, including the Cybertruck and Tesla Semi.Meanwhile, Elon Musk’s electric vehicle venture is facing regulatory scrutiny in China and the U.S. with high profile vehicle crashes leading to negative publicity and investigations by vehicle safety authorities in both nations.Many believe that CEO Elon Musk’s tweets about bitcoin and dogecoin have also contributed to the volatility in Tesla’s stock. Musk has tens of millions of followers on Twitter.Musk, a proponent of cryptocurrency generally, announced last week that Tesla was indefinitely suspending the acceptance of bitcoin as a payment for cars, saying he was concerned by the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions.” Tesla revealed earlier this year that it bought $1.5 billion worth of bitcoin.Tesla shares have dropped nearly 20% in 2021 after surging a whopping 740% in 2020.Enjoyed this article?For exclusive stock picks, investment ideas and CNBC global livestreamSign up for CNBC ProStart your free trial now

David Zaslav sees 400 million streaming subscribers one day for combined Discovery-WarnerMedia

Discovery CEO David Zaslav told CNBC on Monday he thinks the new company created out of a merger with AT&T’s WarnerMedia could eventually attract 400 million global streaming video subscribers.Zaslav, a media executive with decades of experience, said the two are collectively a quarter of the way there already. He was tapped to lead the combined firm.”We own the full ecosystem,” Zaslav said on “Squawk on the Street.” “Netflix is a great company. Disney is a great company, but we have a portfolio of content that is very diverse and broadly appealing.””We think it could be [up to] 400 million homes over the long-term,” added Zaslav — who, prior to Discovery, had a long tenure at NBC where he was instrumental in launching CNBC.Asked whether such a lofty prediction was a realistic goal, Zaslav said: “There’s billions of people out there that we could reach in the market.”Here’s a rundown of the streaming landscape:Netflix has nearly 208 million global subscribers, according to its latest quarterly earnings release.Last week, Disney said Disney+ ended the fiscal second quarter with 103.6 million subscribers and doubled down on its plans to reach between 230 million and 260 million subscribers by 2024.Disney also reported that its ESPN+ had 13.8 million subscribers, while its third streaming property Hulu had 41.6 million total subscribers.Out of the more than 200 million Amazon Prime members, the company said in April that over 175 million of them watched content through Prime Video in the past year.The Discovery/WarnerMedia deal would bring together content properties including HBO, CNN, Turner Sports and the Warner Bros. studio as well as the Discovery Channel, HGTV and Food Network.WarnerMedia’s flagship digital streaming service, HBO Max, debuted in the U.S. in May 2020. Discovery’s direct-to-consumer streaming service, Discovery+, launched in January.The merger deal announced Monday represents the latest chapter in the ever-intensifying streaming wars, as media and entertainment companies battle for consumers’ dollars directly in a shift away from traditional pay TV.Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC.

AT&T battled the DOJ to buy Time Warner, only to spin it out again three years later

In this articleTDISCAThen-WarnerMedia CEO John Stankey speaks in 2016.John Lamparski | Getty Images Entertainment | Getty ImagesJust three years ago, AT&T finally closed its $85 billion deal to buy Time Warner, ending a protracted battle with the Justice Department under then-President Donald Trump, which sought to block the deal.Now it’s spinning off its media assets from the deal to combine with Discovery to create a content giant. If the deal is approved by regulators, AT&T will receive $43 billion in cash, debt and WarnerMedia’s retention of some debt, while effectively undoing its earlier merger. The companies said they expect the deal to close in the middle of 2022.The deal marks a stark change in direction for AT&T after it spent a year fighting to buy Time Warner to create a vertically integrated empire of both content and distribution. The company that fought so hard for brands such as CNN, HBO and Warner Bros. just a few years ago is now ready to let them go.The shift highlights how fast the media landscape has changed, as people switch away from pay TV and toward streaming video services in record numbers. The competition for those subscribers is fierce, underscored by the launch of Disney’s fast-growing platform and Netflix’s continuing growth.Meanwhile, AT&T faces new competition in its core business, as T-Mobile and Sprint merged in 2020 to form a more formidable competitor alongside Verizon, and all three companies are racing to roll out faster 5G service to subscribers.AT&T CEO John Stankey alluded to the changed environment in an interview on CNBC’s “Squawk on the Street” on Monday.”Things have changed a bit since we did the transaction,” said Stankey, who led AT&T’s Entertainment Group at the time of the merger and was later named CEO of WarnerMedia before taking on his current role. “Despite the fact that we are doing this relatively quickly, shareholders have still done reasonably well with this decision.”Here’s a look back at the long road it took for AT&T to acquire Time Warner (since renamed WarnerMedia):AT&T says Time Warner is ‘a perfect match’In October 2016, AT&T announced its plans to buy Time Warner. Randall Stephenson, then the CEO of AT&T, called the pair “a perfect match” in a statement accompanying the release.AT&T touted the “complementary strengths” of the two businesses, which it said would allow it to deliver customers premium content from Time Warner to every screen through its network.”A big customer pain point is paying for content once but not being able to access it on any device, anywhere. Our goal is to solve that,” Stephenson said in a statement at the time. “We intend to give customers unmatched choice, quality, value and experiences that will define the future of media and communications.”AT&T positioned the deal as a win for customers, saying it would give them new choices and offer more relevant content and advertising because of its insights across its network.But Trump and his Justice Department didn’t see it the same way.Trump opposes the dealFormer U.S. President Donald Trump speaks at the Conservative Political Action Conference in Orlando, Florida, February 28, 2021.Octavio Jones | ReutersAs a candidate, Trump bashed the AT&T-Time Warner deal shortly after it was announced, saying his administration would not approve the deal “because it’s too much concentration of power in the hands of too few.”Once elected, Trump held to that promise. Though some pundits had speculated after the election that a Republican administration would still be positive for the deal’s prospects, Trump’s Justice Department later disproved that thinking by filing a lawsuit to block the merger in November 2017.Many Democrats and antitrust experts feared Trump’s opposition to the deal influenced the DOJ’s lawsuit. Trump made no secret of his distaste for Time Warner-owned CNN, which he often positioned as his foil when slamming what he called the “fake news.”The DOJ’s top antitrust official at the time, Makan Delrahim, has repeatedly denied that Trump held any sway over the decision to seek to block the merger. He told CNBC as recently as January that he “never” spoke with Trump or heard from White House officials about the case during the investigation or trial.A fight with the DOJWhen the DOJ sued to block the AT&T-Time Warner merger in 2017, it claimed the combination was unlawful and would ultimately harm consumers by raising prices.Stephenson said on a conference call at the time that the suit would have “nothing but a freezing effect on commerce.”The lawsuit came shortly after Delrahim had been approved by the Senate to lead the DOJ’s Antitrust Division. But a year before filing the lawsuit to block the case, Delrahim had told a Canadian news outlet that he didn’t see the combination “as a major antitrust problem.” He did acknowledge at the time there could be some concerns about a distributor owning content and its impact on other distributors.In June 2018, U.S. District Court Judge Richard Leon ruled that the deal was legal and placed no restrictions on the merger’s close. Leon wrote that the government failed to meet its burden to prove the deal would substantially lessen competition.The DOJ dropped the suit after losing on appeal in February 2019.Delrahim, for his part, told CNBC earlier this year that he still believes a different judge might have handed him a win.”Sometimes different judges could reach different conclusions on the same exact set of facts. So I’m convinced we might have had a different outcome if we had a different judge in that case,” he said. Never mindAT&T and Time Warner officially closed their merger in June 2018, prior to the DOJ’s appeal.Since then, AT&T changed the name of the media business to WarnerMedia and shuffled around staff and streaming services, including simplifying HBO’s streaming offerings.Still, HBO has lagged behind in subscriber count compared with rivals like Netflix and Disney+. HBO and HBO Max reportedly have about 64 million global subscribers, while Netflix has about 208 million and Disney+ more than 100 million in about a year and a half of service.After spending so much time fighting to acquire Time Warner, AT&T’s decision to let those assets go is an acknowledgement of the new realities of the streaming wars, which seems to reward services with sprawling content offerings like Netflix’s and Disney’s deep archive of beloved classics.”My job is to make sure this came out on balance right for the AT&T shareholder in aggregate,” Stankey told CNBC Monday, “and I think we did that here.”Subscribe to CNBC on YouTube.WATCH: Cramer says he would want to own AT&T less after Discovery deal

AT&T CEO John Stankey's biggest corporate reversal in history rejects former boss Randall Stephenson

In this articleDISCATJohn Stankey, senior executive vice president of AT&T Inc. merger integration planning, arrives to federal court in Washington, D.C., U.S., on Monday, April 30, 2018. Andrew Harrer | Bloomberg | Getty ImagesIt didn’t work. It was misguided. It never really made sense to begin with. And we’re not talking about Quibi.AT&T announced Monday it decided to spin off WarnerMedia, merging it with Discovery to form a new media and entertainment company likely worth well over $100 billion.AT&T’s decision to split out WarnerMedia comes less than three years after closing its $100 billion transaction, including debt, is an admission that putting a large content asset with a wireless phone company had few long-lasting synergies. If anything, WarnerMedia became an albatross on AT&T shares, which have underperformed Verizon and T-Mobile since the deal’s completion date on June 14, 2018.AT&T CEO John Stankey also sold a 30% stake in DirecTV and other linear pay-TV assets in February, along with operational control, to TPG. That deal also partially unwound a major AT&T acquisition from just a few years earlier. AT&T spent $67.1 billion, including debt, on DirecTV in 2015.Stankey was former AT&T CEO Randall Stephenson’s right-hand man. He had defended the DirecTV and the Time Warner acquisitions in the past.But his actions signal something that his words have not: both deals haven’t worked.Here’s what Stephenson said about why AT&T should buy Time Warner right after the deal was announced in 2016.”Why put the two companies together?” Stephenson said. “The world of distribution and content is converging, and we need to move fast, and if we want to do something truly unique, begin to curate content differently, begin to format content different for these mobile environments — this is all about mobility. Think DirecTV Now, the new product we’re bringing to market. What can you do with Time Warner content really fast and very uniquely for our customers? Can you begin to integrate social into that content? Can you give the capability to … I’m watching content, I want to clip it, I want to send it via social media to my friends. Can we iterate on that quickly, and can we give a unique experience to our customers?”Whatever he was talking about there never happened. Instead, here’s what has happened.Media companies have realized that linear pay-TV is a slowly dying business. That’s why Stankey partially unloaded DirecTV, a linear pay-TV distribution business.Media companies have attempted to counteract the loss of pay-TV subscribers with direct-to-consumer services that allow users to pay for access to content without subscribing to cable. This has turned entertainment giants into distribution platforms, themselves, a la Netflix.After running WarnerMedia for about two years, Stankey clearly concluded AT&T was at best not necessary as an owner of media assets and at worse holding the wireless company and the media business back.”My job as the CEO of AT&T is to turn out to the employee body, who all have good ideas on how to grow this business and where to take it, and make sure I facilitate those opportunities,” Stankey told reporters Monday. “Looking out over the next couple years on these great growth opportunities we have at AT&T, whether it’s fixed broadband, what we do in wireless and what we can do in growing the media business, it became clear to me that we were going to need a different capital structure to get that done. It was important that I not do something in my decision-making that caused anyone to slow down in their execution.”Stankey went on to acknowledge that instead of supercharging WarnerMedia, as Stephenson had hoped, AT&T was actually holding WarnerMedia back.”Streaming has evolved in the last couple of years,” Stankey said. “The global opportunity from a shareholder accretion perspective is far greater to seize that opportunity on a stand-alone basis than it is to continue to work on improving our domestic connectivity business.”In other words, Stankey said adding Discovery’s content and giving WarnerMedia flexibility to spend billions on content was better for AT&T than any benefits WarnerMedia provided AT&T wireless.That’s as clear of an acknowledgement as possible that Stankey concluded vertical integration wasn’t helping AT&T shareholders.Elliott’s influenceWhile Stankey said he decided in recent months that WarnerMedia needed a new capital structure to better compete against rival streaming services, prompting the deal with Discovery, he seriously started to consider extracting WarnerMedia from AT&T after activist hedge fund Elliott Management took a stake in the company in 2019 and publicly chastised management in a letter, according to people familiar with the matter.At first, Elliott believed Stankey was part of the problem, assisting Stephenson in deals that moved AT&T away from its focus on wireless. But after expediting Stephenson’s retirement and helping run a search for a new CEO, Elliott came to believe Stankey was actually the right man for the job, said three of the people, who asked not to be named because the discussions were private.Stankey told Elliott privately he was his own man — not a Stephenson clone — and would come to his own viewpoints about the value of DirecTV and WarnerMedia. After running a months-long wide search for a new CEO, Elliott decided it would take a chance on Stankey being a man of his word.Stankey began to meet with financial advisers to discuss a transaction in September, according to people familiar with the matter. Reaching a deal with Discovery has allowed the new company to have one class of stock — giving the merged entity flexibility to buy other media assets or sell to an even larger company down the road.Even Elliott was surprised with Stankey’s speed and willingness to take its advice on rationalizing the AT&T portfolio, noting he used phrases Monday such as “focuses our management team” and “simplifying AT&T’s investment thesis” that nearly replicate language from the hedge fund’s letter, the people said.Stankey also impressed Discovery shareholder John Malone on his willingness to be shareholder friendly with his decisions, another person said.”It has been a transformational year at AT&T since John Stankey took over as CEO, and today’s announcement represents another impressive step in the company’s recent evolution,” Elliott said in a statement. “AT&T has now executed on its promise to streamline operations and re-focus on its core businesses, all while improving operational execution, enhancing its financial position and advancing its corporate governance. As investors, Elliott supports AT&T in its efforts to best position the company for future success.”