AT&T to become media giant
Group opts for $85bn tie-up with Time Warner but the deal is expected to face intense scrutiny from regulators
Comcast Corporation’s $30bn acquisition of NBCUniversal, creating an industry behemoth. Several argued for close regulatory scrutiny of the ATT deal.
“Such a massive consolidation in this industry requires rigorous evaluation and serious scrutiny,” said US Senator Richard Blumenthal, former attorney-general of Connecticut.
US Republican presidential nominee Donald Trump said at a rally on Saturday that he would block any AT&T-Time Warner deal if he wins the November 8 election. He has complained about media coverage of his campaign, especially by Time Warner’s CNN.
“It’s too much concentration of power in the hands of too few,” Trump said.
Representatives of his Democratic rival, Hillary Clinton, did not immediately respond to a request for comment.
CONTENT PLUS DELIVERY
A horse-drawn carriage rides past the Time Warner Center in New York, US on Saturday. According to a statement, AT&T agreed to buy Time Warner for $107.50 a share. about 38-million video subscribers through DirecTV and its U-verse service.
Time Warner is a major force in movies, TV and video games. Its assets include the HBO, CNN, TBS and TNT networks as well as the Warner Bros film studio, producer of the Batman and Harry Potter film franchises. The company also owns a 10% stake in video streaming site Hulu. The HBO network alone has more than 130-million subscribers.
The deal is the latest in the consolidation of the telecom and media sectors, coming on the heels of AT&T’s purchase of NBCUniversal.
Verizon Communications is in the process of buying Yahoo for about $4.8bn.
Time Warner CEO Jeff Bewkes rejected an $80bn offer from Twenty-First Century Fox in 2014.
FINANCING
AT&T said the cash portion of the purchase price would be financed with new debt and cash on its balance sheet. It said it had an 18-month commitment for an unsecured bridge term facility for $40bn. AT&T currently has only $7.2bn in cash on hand. Further borrowing could put pressure on its credit rating as it already had $120bn in net debt as of June 30, according to Moody’s.
AT&T said the deal would add to earnings per share in the first year after closing. The group said that it expected $1bn in annual run-rate cost savings within three years of closing, chiefly driven by lower corporate and procurement spending.
5G IS COMING
Owning more content gives cable and telecom companies bargaining leverage with other content companies as customers demand smaller, hand-picked cable offerings or switch to watching online. New mobile technology including next-generation 5G networks could make a content tie-up especially attractive for wireless providers.
“We think 5G mobile is coming, we think 5G mobile is an epic game-changer,” Rich Tullo, director of research at Albert Fried & Co, said, adding that mobile providers would be in position to disrupt traditional pay-TV services.