10 facts about $85 bn AT&T deal to buy Time Warner

AT&T said it will close the $85 billion deal to buy Time Warner next week after the wireless major won an approval from a U.S. court on Tuesday.
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A couple of Reuters and other media reports have identified some of the emerging trends to watch out in the US telecom and media space following the mega deal between AT&T and Time Warner.

First, the deal, which faced legal scrutiny and reaction from the US president Donald Trump, will be allowing AT&T to compete with internet companies that dominate digital advertising and providing new sources of revenue.

Second, there is no clarity on the media and content strategy of Verizon under the new CEO Hans Vestberg. The Ericsson former CEO is said to be focusing on building out 4G and 5G network cost effectively and build business rather than acquiring big media companies. It has done media acquisitions of Yahoo and AOL earlier. Verizon should target a combined CBS and Viacom.

Third, US judiciary is still sitting above the U.S. President Donald Trump’s administration that tried to block the deal. President Donald Trump, according to media reports, does not like the influence of some of the channels from Time Warner.

Fourth, the deal would be a turning point for the global media industry. There may be some more deals in the pipeline. Reliance Jio, an Indian operator founded by billionaire Mukesh Ambani, has already made acquisitions in the content space.

Fifth, the global media industry will be waiting for further action from companies like Netflix and Alphabet’s Google which produce content and sell it online directly to consumers, without a cable subscription. Cable, satellite and wireless carriers may buy content companies as part of the strategy to boost ARPU.

Sixth, the ruling could prompt a cascade of pay TV companies buying television and movie makers. Comcast’s bid for some Twenty-First Century Fox assets will see the light at the end of the tunnel.

Seven, the merger, including debt, would be the fourth largest deal ever attempted in the global telecom, media and entertainment space, according to Thomson Reuters data. It would also be the 12th largest deal in any sector.

Eight, AT&T can use the Time Warner content to fill its streaming services DirecTV Now and soon-to-be-launched AT&T Watch, which are cheaper online video packages with fewer channels.

Nine, T-Mobile US and Sprint are silent about big-ticket acquisitions in the media space. But T-Mobile will be able to buy Sprint without much hurdles this time, analysts say. Will SoftBank buy big media companies to boost its telecom revenues? Orange, China Mobile, Singtel and Vodafone are the other big telecom operators which can make investment in media business.

Ten, telecom operators’ 5G will bolster network speed. Mobile phone users need more high quality content on their costly 5G plans.

Background

The Justice Department filed a lawsuit to stop the deal in November 2017, saying that AT&T’s ownership of both DirecTV and Time Warner would give AT&T unfair leverage against rival cable providers that relied on Time Warner’s content, such as CNN and HBO’s Game of Thrones.

AT&T in a six-week trial argued that the purchase of Time Warner would allow it to gain information about viewers needed to target digital advertising, much like Facebook and Google already do.

The government estimated costs to industry rivals, such as Charter Communications, would increase by $580 million a year if AT&T owned Time Warner.

The deal cost AT&T’s top lobbyist, Bob Quinn, his job in May after it became public that AT&T had paid Trump’s personal lawyer Michael Cohen $600,000 for advice on winning approval.

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