AT&T CEO Randall Stephenson has a lot more to worry about than his messy hiring of controversial lawyer Michael Cohen.
The telecommunications business is buzzing over Stephenson's relationship with some AT&T board members as the company is locked in a struggle with the Justice Department over its planned $85 billion purchase of Time Warner.
Lobbyists and telecom execs tell FOX Business that some board members have begun to question his judgment on various corporate matters that go beyond his hiring of Cohen, the personal lawyer and fixer for President Donald Trump who is under scrutiny by federal officials over his business practices.
Cohen was hired to provide strategic advice on corporate matters including how to deal with the Trump administration on the Time Warner deal, which the government is opposing in federal court. His contract ran through December of last year, the company said.
Some board members, these executives say, are now questioning Stephenson’s leadership of the company if the acquisition falls through or if the government imposes strict conditions on AT&T’s ability to monetize Time Warner’s programming content. Included is the premium channel HBO as well as CNN and sports programming aired on the company’s Turner networks.
It’s unclear whether Stephenson’s job depends on a clear win in beating back the government’s attempt to upend the Time Warner merger. A decision by U.S. District Judge Richard Leon is expected by early June.
But what is clear, according to executives and lobbyists who say they are familiar with the thinking of some members of AT&T’s board, is that there is a growing level of discontent over Stephenson’s leadership.
They cite the example of Cohen’s hiring as just the latest misstep that has put Stephenson at odds with some AT&T board members. Since he took over at AT&T in May 2007, the company’s stock price has declined more than 19%, compared with an 81% increase in the S&P 500 Index. During that period, the company has experienced setbacks in its various attempts to grow and prosper during a time of upheaval in the telecom business.
These executives also point to Stephenson's ill-fated attempt in 2011 to purchase T-Mobile – a deal that was blocked by the Department of Justice’s antitrust division under President Barack Obama. Then, in 2015, he paid $49 billion for the satellite network DirecTV – a sum that analysts say has not been justified by financial performance.
A similar loss to the DOJ under President Trump will be seen as yet another lapse in judgment that some telecom executives believe could create even more turmoil for Stephenson and his relationship with his board, these executives told FOX Business.
“The grousing is getting louder about Stephenson’s leadership from board members,” said a telecom lobbyist who spoke on condition of anonymity. “He needs a big win in the Time Warner case or the word is he might not be around much longer.”
An AT&T spokeswoman declined to comment on the board members’ views of Stephenson as explained by the lobbyists and telecom executives to FOX Business.
Exactly what would be considered a “loss” for Stephenson and AT&T is difficult to pin down. Of course, a clear opinion from Judge Leon that the AT&T-Time Warner purchase violates antitrust laws because it’s harmful to consumers would be a devastating blow. The government argued that given the vast distribution network of AT&T, it could jack up the price of Time Warner’s premium content to rival distributors.
The company vigorously rebutted that claim during the recently concluded antitrust trial.
AT&T argued that buying Time Warner is necessary to survive as technology companies including Amazon produce content. Meanwhile, consumers are reducing their cable subscriptions, cutting the cord, and eliminating traditional means of viewing content that they increasingly receive over the internet.
Most telecom observers doubt that Judge Leon will go as far as kill the deal outright based on his statements during the trial, where he was seen as mocking some of the government’s arguments about the harm that might be caused to consumers if the merger was allowed to proceed.
Instead, some observers say Judge Leon may impose conditions on the deal that would prevent AT&T from fully leveraging its content from Time Warner, thus preventing the company from jacking up prices when selling programming to competitors.
If the conditions are too stringent, AT&T’s stock will likely fall further, and Stephenson will be shouldering most of the blame. Conversely, if AT&T prevails or needs to meet minimal conditions, Stephenson's job will be secure.
Stephenson’s increasingly strained standing with the AT&T board was seen as the reason for his public mea culpa on Friday over the Cohen hiring. Stephenson issued a rare companywide memo, obtained by FOX Business, attempting to explain the hiring and end controversy that has engulfed the company in recent days.
The memo stated that Cohen’s hiring – at a monthly retainer of $50,000 just after Trump was sworn in as president in January 2017 through December 2017 – was a severe blunder, adding that AT&T’s “reputation has been damaged” in the process.
“There is no other way to say it—AT&T hiring Michael Cohen as a political consultant was a big mistake,” Stephenson wrote.
Stephenson confirmed that his company’s relationship with Cohen was to provide insight into the Trump administration, the president himself and how to deal with the DOJ’s stance on the Time Warner deal. While the company said that Cohen was not hired as an official lobbyist, the announcement mentioned that AT&T’s long-time head of lobbying would be retiring.
Under the terms of its relationship, AT&T paid Cohen through a consulting company known as Essential Consultants. Cohen also used the company to funnel $130,000 in hush money to the pornographic actress known as Stormy Daniels, who claims to have had sex with President Trump in 2006.
Cohen received payments from other parties through the consulting outfit including the pharmaceutical giant Novartis as he began cashing in on his long-time role as Trump’s personal lawyer and occasional fixer of embarrassing problems.
According to a GOP political consultant, Cohen once described himself as “the one person between you and the president.”
A lawyer for Cohen didn’t return a telephone call and email message seeking comment on the statement. In an email to FOX Business, Cohen wrote: “I don’t know who your source may be, but based upon the comment, he or she has no credibility.” He didn’t elaborate.
Cohen is said to have also been involved in an arrangement with another woman who claimed to have had an affair with the president: Karen McDougal, a former Playboy Playmate.
McDougal has said Cohen served as an intermediary in her deal with AMI, the publisher of the National Enquirer, under which she was promised $150,000 in promotions commitments in its various magazines to quash her story about her alleged relationship with Trump in a practice known as “catch and kill.” Trump has denied these allegations as well. A spokesman for AMI denies that Cohen played any role in the negotiations.
In April, the FBI raided Cohen’s offices, looking for information on his work involving Daniels, McDougal and his other business dealings. The raid followed a referral by Special Counsel Robert Mueller to the U.S. Attorney’s Office for the Southern District.
Mueller is investigating whether people in the Trump orbit colluded with Russian nationals to sway the 2016 election in Trump’s favor. Mueller’s office has spoken with AT&T and Novartis about their relationships with Cohen, both companies have confirmed, stating that they have fully cooperated with the probe.
A spokesman for Novartis had no further comment.