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[Newsmaker] AT&T eyes new media future with deal for Time Warner

By Korea Herald
Published : Oct. 23, 2016 - 17:48
AT&T on Saturday unveiled a megadeal for Time Warner that would transform the telecom giant into a media-entertainment powerhouse positioned for a sector facing major technology changes.

The stock-and-cash deal is valued at $108.7 billion including debt, and gives a value of $84.5 billion to Time Warner -- a major name in the sector that includes the Warner Bros. studios in Hollywood and an array of TV assets such as HBO and CNN.

It would give the big US telecom firm “the world‘s best premium content with the networks to deliver it to every screen, however customers want it,” a statement from the companies said.

“This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers,” said AT&T chairman and chief executive Randall Stephenson.

An AT&T cellphone store (top) and the Time Warner Center in New York EPA-Yonhap

The tie-up, which could face tough antitrust scrutiny, makes AT&T a strong rival to Comcast, which owns Time Warner rival NBCUniversal, and aims to counter the growing threat from online services such as Netflix and Amazon.

It also positions AT&T against longtime telecom rival Verizon, which has acquired internet group AOL and is in the process of buying Yahoo, and against new delivery platforms expected from Google and others.

The tie-up includes the vast Time Warner film library, including the Harry Potter franchise, and TV operations that include HBO’s popular “Game of Thrones,” and would allow AT&T to deliver the content to its fiber TV subscribers and also through its newly acquired DirecTV satellite service and mobile devices.

“Premium content always wins,” Stephenson said.

“It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen. We’ll have the world‘s best premium content with the networks to deliver it to every screen.”

But the deal is likely to face tough scrutiny from antitrust regulators, and Republican presidential nominee Donald Trump said he would block it if elected.

Even before the announcement, US consumer groups called for regulators to consider the impact of the tie-up.

John Bergmayer of the consumer group Public Knowledge said the merger could open the door to “self-dealing and discrimination” by a powerful media and delivery group.

“DirecTV, for instance, might favor Time Warner content, crowding out or refusing to carry alternative and independent programing that viewers might prefer,” he said.

“AT&T might also make it more expensive or difficult for competitors to DirecTV or to its streaming service to access Time Warner programing, hoping to drive customers to its own platforms,” he added. “AT&T could also give preferential treatment to its own programing and services on its broadband networks.”

But some analysts said the deal makes sense given the changing media landscape.

Richard Greenfield of BTIG Research said the sector can no longer count on consumers watching “linear” TV and subscribing to expensive cable “bundles,” with many opting for online services and on-demand viewing.

“Time Warner Chairman and CEO Jeff Bewkes and his senior management team can see where the entire legacy media world is headed: secular decline,” he said in a blog post.

“If Time Warner and its management team were confident in the future of the media sector, particularly the cable network industry, they would not be selling now,” he added. “The harsh reality is that the legacy cable network business has been overearning for decades with an unvirtuous circle of pain about to begin.”

AT&T is the second-largest US wireless carrier and third-largest cable TV provider in the United States, while Time Warner controls a valuable stable of entertainment content suppliers, including Warner Bros. film and TV studios, the HBO television production group, cable news giant CNN, and the TNT and TBS cable channels.

The deal would add fresh turmoil to a sector facing challenges from technology and could spur other deals among major players like Disney and 21st Century Fox. It comes with broadcast group CBS and film giant Viacom eyeing plans to remerge a group that split a decade ago.

AT&T had $147 billion in revenues in 2015 while Time Warner reported $28 billion.

AT&T has pursued an aggressive expansion, paying almost $50 billion to buy satellite television provider DirecTV in 2015.

Time Warner traces its history back to the 1990 merger of magazine group Time Inc. and Warner Communications. It later acquired the Turner broadcasting empire that included CNN, TBS and other cable channels.

In 2000, Time Warner was bought by rising internet star AOL for $164 billion in a disastrous deal that was undone years nine later with the decline of the online group.

The group has also spun off its cable TV operations as Time Warner Cable as well as the magazine group Time Inc.(AFP)

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