AT&T to Acquire Time Warner for $85B

Oct 30, 2016, 01:00
AT&T to Acquire Time Warner for $85B

The United States telecommunications giant AT&T is set to acquire media powerhouse Time Warner Inc. for $85.4 billion, in a deal that could possibly be the biggest in the world this year. But the concern is that anything AT&T might do to make its broadband service stand out by tying it to Time Warner's programs and films could hurt consumers overall.

Andre Barlow, an antitrust expert with the law firm Doyle, Barlow and Mazard PLLC, who noted that the government may worry about whether other cable and internet companies would continue to have access to Time Warner content like HBO and CNN. CONSOLIDATION TREND Barclays analyst Amir Rozwadowski said distributors could increasingly look to buy content. "Companies that traditionally ran their businesses in "siloed" environments are now expanding their reach into tangential markets in order to seek out new growth and bundling services in order to reduce churn", he said. It acquired satellite TV provider DirecTV for $48.5 billion in 2015. Dallas-based AT&T and New York-based Time Warner declined to comment. Big mergers like this inevitably mean higher prices for real people, to pay down the money borrowed to finance these deals and their golden parachutes.

AT&T reportedly agreed to pay Time Warner $500 million if the deal did not pass the regulators, a source familiar with the terms of the deal said, cited by the Wall Street Journal. What remains of the company are still valuable assets, among them HBO, Warner Bros., DC Comics, and several notable cable channels such as CNN and Cartoon Network. All of those moves made Time Warner more easily digestible. The deal would deliver to customers the best premium content on every screen, regardless of how customers want to view it, the carrier added.

Netflix, which was very vocal in the failed Comcast Time Warner Cable merger, is yet to weigh on in on the deal. Jeff Bewkes, Time Warner Chairman and CEO, called it "a natural fit between the two companies". Republican presidential candidate Donald Trump even said at a rally on Saturday that he would block the deal between the two companies if he were to become president.

But many consumers already consider ads that know everything about them creepy or invasive, and digital-rights groups complain that any preferential deal AT&T could offer with, say, HBO would hurt competition.

The company, now valued at $230.6 billion, has poured billions of dollars into upgrading its network infrastructure as more customers use their mobile phones to consume videos and music.

Amy Yong, an analyst at Macquarie Capital, recalled many celebrated media deals of the past have turned into duds — in particular, Time Warner's disastrous acquisition by AOL in 2001.

On Friday, Time Warner shares closed at $89.48, up 8%. He said, for example, AT&T might let wireless customers watch TV and movies from Time Warner without counting it against their data caps, which would make video from other providers less attractive.

Time Warner is now valued at $65 billion.

That's where Time Warner comes in.

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