NEW YORK: AT&T is buying Time Warner, the owner of the Warner Bros. movie studio as well as HBO and CNN, for $85.4 billion in a deal that could shake up the media landscape.
The acquisition would combine a telecom giant that owns a leading cellphone business, DirecTV and internet service with the company behind some of the world’s most popular entertainment, including Game of Thrones, the Harry Potter franchise and professional basketball. It would be the latest tie-up between the owners of digital distribution networks — think cable and phone companies — and entertainment and news providers, all aimed at shoring up businesses upended by the internet.
The deal would make Time Warner the target of the two largest media-company acquisitions on record, according to Dealogic. The highest was AOL’s disastrous $94 billion acquisition of Time Warner at the end of the dot-com boom.
Regulators would have to sign off on the deal, which isn’t certain. The prospect of another media giant on the horizon has already drawn fire on the campaign trail. Speaking in Gettysburg, Pa., GOP presidential nominee Donald Trump vowed to kill it if elected because it concentrates too much “power in the hands of too few.”
Sen. Al Franken, a Minnesota Democrat, said the deal “raises some immediate flags about consolidation in the media market” and said he would press for more information on how the deal will affect consumers.
Shares of AT&T, as is typical of acquirers in large deals, fell on reports of a deal in the works on Friday, ending the day down 3 percent.
Merger mania
Companies that provide phone and internet connections are investing in media to find new revenue sources and ensure they don’t get relegated to being just “dumb pipes.” Verizon bought AOL last year and has now proposed a deal for Yahoo to build a digital-ad business. Comcast bought NBCUniversal in 2011.
AT&T has been active, too.
After its attempt to buy wireless competitor T-Mobile was scrapped in 2011 following opposition from regulators, the company doubled down on television by purchasing satellite-TV company DirecTV for $48.5 billion. AT&T is expected to offer a streaming TV package, DirecTV Now, by the end of the year, aimed at people who have dropped their cable subscriptions or never had one.
AT&T CEO Randall Stephenson, who will run the combined company, said the deal will allow AT&T to offer unique services, particularly on mobile, though without offering details. Jeff Bewkes, the Time Warner CEO who will stay with the company for an undefined transition period, added that more money will make it easier to produce additional programming and films.
Both men stressed that it will be easier to “innovate” when the companies are joined and don’t have to negotiate usage rights at arm’s length.
Buying Time Warner may be “a good defensive move” against Comcast as the cable giant continues stretching into new businesses, New Street Research analyst Jonathan Chaplin said in a Friday note.
Potential downsides
Even if the AT&T deal overcomes opposition in Washington, it’s possible that regulators might saddle the combined company with so many conditions that the deal no longer makes sense.
“It’s not hard to imagine what you can do on paper. They would keep HBO exclusive for only DirecTV subscribers, or only make TNT or TBS available over AT&T Wireless,” said analyst Craig Moffett of research firm MoffettNathanson, referring to Time Warner networks. “But as a practical matter, those kinds of strategies are expressly prohibited by the FCC and antitrust law.”
Then there is the $85 billion that AT&T is handing over to Time Warner, almost 40 percent more than investors thought the company was worth a week ago.