Mergers and Acquisitions

Beginning in 1980, with President Ronald Reagan's administration, the federal government has adjusted its policies to allow more horizontal mergers and acquisitions. The states have responded by invoking their antitrust laws to scrutinize these types of transactions. Nevertheless, mergers and acquisitions have increased throughout the U.S. economy, and this has been especially true in the TELECOMMUNICATIONS industry.

Beginning in the mid 1980s and extending to the mid 1990s, each of the three major television networks, ABC, CBS, and NBC, was purchased by another corporation. In 1985, Capital Cities purchased ABC for $3.5 billion. The same year, General Electric (G.E.) purchased RCA, and in 1985, G.E. purchased NBC. Westinghouse purchased CBS in 1994 for $5.4 billion, and the Walt Disney Co. purchased Capital Cities/ABC for $19 billion in 1995. Other mergers also had a major impact on the industry. In 1989, Time, Inc. merged with Warner Corporation to form the largest media conglomerate in the world, and in 1993, Viacom, Inc. purchased Paramount Corporation in an $8.2 billion deal.

These mergers were major news at the time, and they still have an impact on the industry. Congress deregulated much of the industry with the passage of the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (codified in scattered sections of 47 U.S.C.A.). It was the most significant legislative change in the industry since the passage of the Communications Act of 1934, 48 Stat. 1064. The act called for more open competition among companies within the industry, designed for the purpose of improving services to consumers. The result of the legislation was a wide number of mergers among smaller and larger companies within the industry.

Almost immediately after the passage of the Telecommunications Act, four of the seven Bell telephone regional holding companies announced proposed mergers. More mergers occurred among Bell companies and other local carriers. At least 13 significant mergers in the industry occurred in 1996 alone. Time Warner merged with Turner Broadcasting in 1996 in a $6.7 billion deal, creating the largest media corporation in the world. Worldcom, Inc. purchased MFS Communications for $12.4 billion to become the first local and long-distance telephone company since 1984. Westinghouse/CBS purchased Infinity Broadcasting for $4.9 billion, allowing Westinghouse/CBS to become the dominant power in the radio market.

These mergers continued throughout the 1990s and beyond. For instance, Time Warner merged with America Online, Inc. in 2000 in a $166 billion deal to form the largest convergence of INTERNET access and content in the world. Although some companies and consumer groups complained that the formation of these conglomerate companies could stifle competition and control prices, these mergers have become commonplace.