Warner and 85 billion deal is more consolidation ahead . Plus, getting that deal approved calls for scrutiny and Consumer Protection already coming from washington. Lets listen to how both ceos are pitching the transaction. And Goldman Sachs lowers outlook for corporate earnings through 2018. Why it sees Profit Growth slowing in the s p. But first up, at ts mega merger with time warner already facing scrutiny from president ial candidates and capitol hill lawmakers. Earlier on squawk at t ceo Randall Stevenson said he believes the deal will pass regulatory muster. This is one where the nature of this deal is unique from anything that weve done before. And that is a vertical integration. Its a big merger, but its a vertical integration. And as you think about the areas that have been really contentious over the last few years in our industry and in jeffs industry, theyve been horizontal mergers where the government was concerned about a competitor being taken out of the marketplace. This has none of that. So we now know how theyre going to try to frame this deal, guys. Saying no rivals being taken out, distribution and content makes it vertical. Well, look, i think theyre using very traditional methods and i totally understand that. Thats what a lot of the lawyers have done in these deals, but traditional metrics have not been in play more palatable Justice Department. And i would be more concerned about the things lawyers dont seem to understand, which is the tenor of the times, and the tenor of the times says we dont really like big companies. The deals that have been stopped most of them should have been approved. I had lam research on the other day, no overlap, when i asked why said justice. El with why . Well, justice killed it. That goes to the unpredictability of the regulatory process, because i agree with mr. Stephenson, hes correct in the sense of vertical integration should not necessarily bring challenges from antitrust. There will likely be conditions placed on this company, but it would appear at least on the face of it if you follow the rules and the law as we know it that it does not represent an anticompetitive deal in that sense. Its not a horizontal deal. It will take a long time to get done. Youre looking at at t shares that are below. Below even the collar or very close to the bottom of the collar and therefore the value will be 107. 50 or below that. And there you see of course half cash and half stock. Guys, i think though the scrutiny really will come from at t shareholders. And i think some of the questions some of them will have, well, does it really make sense. If youre a time warner shareholder youre likely applauding jeff bu kis. He did deals that came up in a couple years and got a great price for shareholders even though time warner will not be up sharply because of the fact the fall in at t and the time this is going to take to get done. But if youre an at t shareholder, you certainly have to say, okay, do i fully understand the strategy here. By the way, did you see the numbers from the company that we got in terms of earnings . Theyre losing subscribers. Underscores the challenge that their basic business is under from the likes of tmobile. Well talk to john legere in the show. They get growth and coverage and then this unt to talk about the changing world where theyll be able to deliver very specific ads with compelling content thats somewhat unique to the user in an unbundled world. Kind of like what facebook can offer right now, and google can offer right now, and maybe amazon offers right now. Those are the three networks everyone fears in terms of traditional networks, tmobile blew numbers away, sprint is doing the same. I think if i were an att shareholder i think its an easy call to sell. Theres no reason to buy, dividends not that great. Coverage improves because of free cash added from time warner. So thats a positive. Directv also helps in terms of they got good reaction from the shareholders when they bought directv. But i think what they really misread was verizon went up too and that was because these were bottom market equivalents. If you take a look their stocks peaked exactly when Interest Rates decided troughed. Right. I think they misread the Shareholder Base. You do . Yes, i do. I also dont think they care. Although a Shareholder Base cares about dividend, cost of capital is extraordinarily low, going to borrow 40 billion like that. If youre an att shareholder, majority of those people want it because its better than box. Okay. It is. For how long though . Thank you. Thats what they saw. I think they saw, lets get low cheap money and the feds going to raise rates so lock it in right now. If youre Randall Stephenson, i understand it from his perspective, challenged in terms of price competitive environment. What do you do . But you raised the point. Youre not google. Youre not facebook and youre not amazon. Theyre ecosystems whenever they want to be. These guys have to develop. Lelts say Nothing Happened today. Heres what i would be talking about. John legere took a huge number of ads follow twitter feed. Theyre telling you theyre eviscerating att and verizon. Att saw post sub trends lost 268,000 subs. What kind of business is that . Its not a growth business. Exactly. Not a growth business. So they add this. Can we congratlation jeff. Man of his word, kind of exactly the executive i want running my ship. Hes been a Great American. Thats the joke we always make whenever his name comes up. Now hes a really Great American. Hes a great exec. Im not saying he pans stephenson. Stephenson sees the writing on the wall. The problem is that time warner under so well run under bewkes. Ask the bench. Its funny. I spoke to stephenson yesterday and to bewkes a couple times this weekend, but i didnt get an answer to that. Part of the strategic rationale to find out. Theres been speculation, purely speculation about peter would he consider coming in to run this business. Thats a long way away by the way, were talking at least a year for the regulatory review to take place. As jim said it is uncertain even though it would appear on the face of it that vertical integration should not get a heisman from the Justice Department. On the time warner side i will say this though, mr. Bewkes has set about the last decade taking apart this company that included aol, that included Time Warner Cable, that included time magazine. And here he is embracing and taking half of his consideration in stock for a company thats going the exact opposite direction therefore saying what, that actually strategys okay now . I did ask him that, and he said, listen, the world of wireless video and new opportunities for delivering ads in more effective way is now here. And it wasnt. And as for Time Warner Cable, he said it was a regional player, it didnt have nationwide status. But its interesting. Let me ask you because i know Parent Company of this network and i own shares in it, comcast nbc has worked. The stock is up from 16 to 63 it has worked, but has it worked because of the integration amongst everything or worked because they did a great job buying the assets . I think it was an asset that wasnt well run and theyve made it well run. The theme parks incredibly well run. Just how much cash they can out of this. But if i were att the worst that happens is maybe we become like comcast. Except were in this world where things are becoming unbundled. If theres a bigger sign, i dont know what it is than this deal itself where hes talking to me, Randall Stephenson, yesterday, about directv now, thats their over the top product, is going to be a key product. But thats old technology. When he says that premium content will win, by the way sounds more like Sumner Redstone than anybody else. Yes. But directv sells subscriptions to people who are getting satellite broadcast. Its going up by the way. The subs have gone up. But in this unbundled world will that continue . And hes going to own networks that will rely on being part of that bundle or have to be part of every ott bundle. Isnt that a challenge . Theres a challenge every has. Whether its wireless business, john legere is atalk about directv for a second. I love football. And i have fantasy and i have johnson. That was a 66 game last night. Okay, im telling you that that nfl package peaked. I think it peaked. I think ratings are down this year because people theres too much football. The games are not exciting, the refs are involved in everything. Im not being facetious. Im telling you directv would be worth less today than it was a year ago. But to davids point heres coen this morning, half ebitda comes from basic Cable Networks in a world where content is being disaggregated. So theyre getting into the problem that we already know. Yes. And i ask that question of mr. Stephenson yesterday in our conversation. And i know obviously he was on with the guys this morning. Right. And he, you know, he seems to think or believe that theyre going to be able to add more value as a result of having this unique, not exclusive by the way, unique content available to their subscribers that will obviously help them deliver ads on a much more effective way, get a much higher price from advertisers as a result and keep their subscriber base. Well, good luck. But facebook knows exactly who i am and is only pushing ads toward me that i want. That is an extraordinary competitor. That is a tank. These guys are calvary. He cant buy facebook. No, but facebook can crush him. And he cant buy google. Combination of whatsapp, i think they recognize in the older generation that theyve got to do something, whatever it takes. Theyre kind of in the whatever it takes mode. And facebook is in the take share from them mode. Yeah. Listen to not include facebook in the discussion is crazy. Of course. And sometimes you feel like youre in the time machine go back to 1998 i feel like ive had some of these same conversations back then it was convergence between the internet and television. Now its about wireless and everything else. But its similar kinds of conversations. And it doesnt mean it worked back then either. No, some would say youre being cynical. I would say youre being correctly skeptical. Okay, thank you. Im coming from the other side which says i remember the Justice Department bank of america lets talk about the Justice Department. Bank of america, citi and j. P. Morgan go down to the Justice Department say, listen, how can you tell us we should pay 17 billion, 13 billion, 7 billion, and they say because were the Justice Department and we dont have to explain everything. When the lam research was killed and that was a very important deal because they had no that was a total vertical. When they asked them, they said it was the Justice Department. Dow and dupont, they want that deal done, when i asked the problem, its the Justice Department. Im saying Justice Department under either candidate is not what you think it is. The Justice Department has not shown any due process, so to speak. They do not tell you why theyre blocking a deal. You can go to court at least with them. The fcc is a different story. Remember the fcc is the one blocked comcast and Time Warner Cable and could go on forever with this review. Here it doesnt really have as big a role. They could get rid of the broadcast licenses and not have any role at all. Ftc, you think walgreens that reported last week its been more than a year for rite aid, okay . The government says we dont like deals. If all of this is such a high bar and content and distribution being together is a problem, why was our deal done . Why was comcast approved . Because they were giving away oh, because they were roofs. They didnt know at the time. They didnt know. I dont know. There were plenty of conditions put on the deal that comcast did. But they let it go. And now they feel like they shouldnt. But why . What has it done to competition . Has it really lessened competition . It hasnt. Youre a candidate from a Major Party Republican major party saying i would kill this deal right now, what im saying its provoked a level of unpopulism not unlike united and continental, you have a concentration of power think about the American People. You know what, technology and everything is moving so much quicker than the Justice Department can ever figure it out. But the American People have had it. They saw their price rise they saw fares rise when it came to airlines. Im not kidding. I hear you. The American People have had it, the Justice Department as much as we may respect the Justice Department, responds to what the American People think. I could not believe that the first thing trump said this deals dead, under my regime its dead. Who did he talk to . Did he call five exsupreme court judges. Who did he call . There used to be a Justice Department. It was independent and made rules. It might still be and you can take them to court. And if law prevails one would expect this deal will get done with provisions on it and it will be a year from now and the world will potentially have moved on. Who knows. Things are going so quickly. The concussions in football and refs in directv signups go down. Interest rates go up. Interest rates go up and directv satellite when i asked apple to please buy directv because i wanted integrated, said satellite, that technology is old. To me it was new. I remember when sputnik went up. If you asked Alexander Graham bell said your company is going to buy a Tv Media Company in the coming years, he would have said whats television. Thats a good point. Going hollywood is a big deal. Well, stephenson and stephenson probably watches tv. I understand hes working from what he can. Hes working from the dealing the hand thats dealt him. He doesnt go home. He goes big. Yes. Right. Legere, the traditional business of what we would be talking about right now is i cannot believe legere took that many customers. Instead the dialogue is, hey, you know what, hbo subscription, directv, nfl well, if theres any gem in this deal, we all know what it is. It is hbo, no doubt about that. Remember when those crazy people were trying to get him to separate hbo from time warner, since i was one of those crazies. Hbo is good. I think the three brands he mentioned this morning, game of thrones, superman and cnn. Those are worth having. The good news is content is still important, guys. Yes. Until we get replaced by machines. Content is king. Yeah. Fleet content you put on facebook how much facebook pay you for all that content . Zero. Thats a good gross margin. These guys all know it. Tired of paying. I like that. Thats me with my Virtual Reality goggles on. When we come back this morning, well look at some of the other deals making news this morning, and there are a lot of other ones. More reaction to at t time warner, former aol chairman and ceo jon miller will join us, well get to Kimberly Clark and others when squawk on the street continues in a moment. These goofy glasses. Yeah. Well, we gotta hand it to fedex. Theyve helped make our ecommerce so easy, and now were getting all kinds of new customers. I know. Can you believe were getting orders from canada, ireland. This ones going to new zealand. New zealand . Psst. Ah, false alarm. Hey you guys are gonna scare away the deer idiots. Providing Global Access for small business. Fedex. More m a to tell you about this morning. Aircraft component maker Rockwell Collins agreeing to acquire airspace. Stay tuned for the ceo of Rockwell Collins in the next hour. Te ameritrade buying scottrade in a 4 billion deal. October is now the Third Largest month ever in announced of u. S. M a. Wow. Geez, thats incredible. This is a giant period right here. Wow. By the way i think its going i mean, i think this month, yeah, the fourth quarters going to keep going. These two deals are fabulous. So if youre Rockwell Collins, c. O. O. Kind, you got a deal with stretch bombardia, boeing needs to make more supply and airbus which is powerful, you need to merge. Remember, b. E. A. Is the galley, seats are very expensive. So this is a way to be able to deal with how powerful those big three are. For scott, i mean, thats great. Too many players killing each other. Now theres less competition. Thats smart too. I think both deals fly under the radar screen and get done. But they are what has to happen in order to be able to deal with, one, a very cutthroat atmosphere in brokerage, and two, a really powerful group of Aircraft Companies that Rockwell Collins gets played off of. The name has been a around for a long time as a potential remember, it failed. Right. But b. E. A. Is a very good company. I was very surprised that thing kicked around for so long given how powerful boeing, airbus are. 27. 90 in shares of rockwell, nice collar 7. 5 up or down as opposed to 5 by the way with att and time warner. And at t is below the bottom of the collar. Youre not getting any more of a ratio there. Wow. Okay. So it was about a 22pluspercent premium, jim. Just a classic deal. Those are the k