AT&T closes $85 bn Time Warner deal amid concerns on $180 bn debt

AT&T, the second largest wireless operator in the US, has completed the $85 billion deal to buy media company Time Warner, becoming a $190 billion revenue company. There are concerns about $180 billion debt of the company.

The combined company will be investing $20-$21 billion. AT&T’s spending plans include investing more in HBO, the premium TV channel with the hit show “Game of Thrones,” and expanding HBO’s direct-to-consumer platform.

Time Warner will be known as WarnerMedia. Turner CEO John Martin will leave the company. John Stankey will serve as CEO of WarnerMedia.AT&T buys Time Warner for CNN
This means, AT&T will utilize global media and entertainment leaders Warner Bros., HBO and Turner to strengthen its leadership in technology and its video, mobile and broadband markets.

Verizon, the number one wireless service provider, recently revealed that its main focus will not be in making big ticket acquisitions in media space. Comcast yesterday said it enhanced the bid price to $60 billion to buy Fox business from Rupert Murdoch.

Randall Stephenson, chairman and CEO of AT&T, said: “We’re going to bring a fresh approach to how the media and entertainment industry works for consumers, content creators, distributors and advertisers.”

AT&T will focus on bringing content to its 170 million Direct to Consumer Distribution (D2C) customers across its TV, video streaming, mobile and broadband services in the U.S., mobile in Mexico and TV in Latin America.

AT&T’s wireless and fiber network, including investments in technology such as 5G, will provide the network bandwidth required as customers increase engagement with premium video and emerging 4K and virtual reality content.

What Time Warner brings

Increased synergies to $2.5 billion

$1.5 billion in annualized cost synergies by end of year 3 following close

$1 billion of annualized revenue synergies by end of year 3

Net debt to adjusted EBITDA 2.9x at close

2.5x at end of year 1

AT&T structure

AT&T Communications provides mobile, broadband, video and other communications services to U.S.-based consumers and nearly 3.5 million companies. Revenues from these services totaled more than $150 billion in 2017. John Donovan is the CEO of AT&T Communications.

AT&T’s media business — HBO, Turner and Warner Bros — had revenues of more than $31 billion in 2017. John Stankey is the CEO of AT&T’s media business.

AT&T International provides mobile services in Mexico to consumers and businesses, plus pay-TV service across 11 countries in South America and the Caribbean. It had revenues of more than $8 billion in 2017. Lori Lee is the CEO of AT&T International.

AT&T’s advertising and analytics business provides marketers with advertising solutions using customer insights from AT&T’s TV, mobile and broadband services, combined with extensive ad inventory from Turner and AT&T’s pay-TV services. Brian Lesser is the CEO of AT&T’s ad and analytics business.

The deal, first announced in October 2016, was opposed by President Donald Trump. AT&T was sued by the Justice Department, but won approval from a judge to move forward with the deal on Tuesday following a six-week trial, Reuters reported.

The AT&T ruling is expected to trigger a wave of mergers in the media sector, which has been upended by companies like Netflix and Alphabet’s Google.