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AT&T CEO to Justice Department: Bring it on

Randall Stephenson says he saw the appeal to stop the AT&T-Time Warner merger coming. But he's confident his company will win.

It's full steam ahead for AT&T, even as the Department of Justice moves ahead with an appeal to stop its $85 billion merger with Time Warner.  

In an interview with CNBC on Friday, AT&T CEO Randall Stephenson said he thinks the chances the government will succeed in its appeal of its merger are "remote." He also said the company, which closed its deal with Time Warner last month after it won a decisive victory in federal court, is moving ahead with its plans to integrate the media company into its business.

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Randall Stephenson says he was prepared for the Justice Department to appeal a federal judge's ruling to allow AT&T's $85 billion merger with Time Warner. 

Drew Angerer / Getty Images

"This changes nothing we'll be doing over the next 30 days or the next 12 months," he said. "We're about executing our plan. It's a very narrow path that would have to be traveled to get this thing reversed in any way."

The Justice Department sued AT&T to block its merger with Time Warner, citing antitrust concerns that AT&T, owner of satellite television provider DirecTV, could charge rival distributors more for Time Warner content, resulting in higher prices for consumers.

A federal judge disagreed and ruled the merger was legal. On Thursday, the DOJ said it would appeal the decision.

Time Warner is a key part of AT&T's strategy to transform itself into an entertainment powerhouse. The deal has allowed AT&T to take control over cable channels like TNT, CNN, and  HBO -- home to Westworld and Game of Thrones. The company has wasted no time in putting its new assets to work. Last month, it launched a second, low-cost streaming service called WatchTV. It's also been pushing Time Warner's crown jewel asset, HBO, to expand its content.

Stephenson said he expected the Justice Department to pursue its case, even though the government had declined to seek a stay, letting AT&T seal its deal within two days.

"I had contemplated an appeal from the very beginning," he said. "The government obviously seems very intent on pursuing this particular transaction ... so we were expecting an appeal."

AT&T has raised fees for its wireless and DirecTV Now customers since closing the merger. The company has also made several acquisitions to build out its media and advertising operations. In June it bought digital advertising company AppNexus for a reported $1.6 billion.

Stephenson also addressed concerns about how the company is integrating its new media properties into its business. Specifically, he addressed comments made by John Stankey, chief executive of the newly named Warner Media, suggesting that AT&T plans to add a loads more content to gin up advertising dollars for brands like HBO.

Stankey reportedly told employees at HBO headquarters in New York last month that the company needed to increase subscriber "engagement" to increase the hours people spend watching its shows, according to The New York Times. Instead of spending "hours a month" watching HBO, Stankey said he wanted to see increases in "hours a day." To do that, many in the media industry interpreted that to mean that HBO would need to create more content and transition HBO from an operation focused on its Sunday night lineup into something bigger and broader, something that critics fear would ruin the brand.

But Stephenson tried to quell those concerns.  

"It's an amazing franchise; it's an amazing brand," he said. "And so anything you do, you're going to do very cautiously, recognizing just how successful it's been."

He said the company does want to increase engagement, since the "more engagement you have, the more opportunity you have to create value." But he said there are other ways to do this than "pumping more content into HBO."  

"We're looking at a lot of different avenues for driving engagement," he said. "We have a lot of digital properties."

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