The sale has been validated Saturday, when the boards of directors of both companies. AT&T to get tv channels, including HBO and CNN, and the studios Warner.
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A new empire of media and telecommunications is about to see the light of day. The boards of directors of AT&T and Time Warner met Saturday 22 October to endorse the merger of the two companies, confirming the information revealed on Thursday by Bloomberg. The telecoms operator bought out the owner of tv channels such as HBO and CNN, for a total amount of 108,7 billion ($ 99,8 billion euros) in debt securities of AT&T and cash. With this transaction, Time Warner is valued at an amount of 85.4 billion dollars.
The idea of this merger is to combine content and broadcasting ability, while offering new deals on the Internet, in a market of declining pay-tv. ” We have always been convinced that a rapprochement between the content and distribution make sense, says Alan Gould, an analyst at Brean Capital, in a note published Friday. the given the rapid evolution of the sector of the distribution, we believe that ownership of content could be beneficial. “
For the number two telecom american, this strategic shift has become increasingly evident. In a mobile market nearing saturation, AT&T had, at first, decided to grow by acquisition. In 2011, he made an offer on T-Mobile, the american subsidiary of Deutsche Telekom, but the Federal Communications Commission (FCC), the sector regulator, had objected to it, considering that the weight of the new set resulted in an oligopolistic position.
therefore, like its competitors, such as Verizon and Comcast, AT&T has launched in a race to content to feed their distribution networks. The operator thus redeemed, in 2015, DirecTV, the specialist in satellite tv, for 48,5 billion dollars. An acquisition that has allowed the group to become the first television broadcaster in the United States, with 26 million subscribers, to Comcast. The operation has allowed him to transition to hand over the rights to the National Football League.
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at the same time, in 2014, AT&T has created with the group Chernin joint venture Otter Media, to invest in the media and create a service for streaming video. The CEO of this company, Peter Chernin, has taken the role of council in the takeover of Time Warner.
With the acquisition, AT&T completes its portfolio of content. In addition to HBO and CNN, Time Warner owns Cinemax, but also of TBS, the channel that specializes in comedy programs, even with Turner Sports, not to mention the movie studios Warner Bros. Finally, AT&T puts a foot in the streaming service Hulu, including Time Warner owns 10 % in the side of Disney, 21st Century Fox and NBCUniversal.
Even if the telecom operator is still in full digestion of DirecTV, the group’s CEO, Randall Stephenson, was persuaded that it was necessary to continue to accelerate, while the sector is in a full boil. Its competitor in the telecoms, Verizon, just buy Yahoo for $ 4.8 billion, after having acquired AOL in 2015 to $ 4.4 billion. And Comcast after the takeover of NBCUniversal in 2009 to $ 30 billion, just put the hand on DreamWorks Animation for $ 3.8 billion.
In this context, Time Warner is a perfect prey, because one of the last available on the market highly coveted content. Disney, valued at Grant at $ 150 billion, is a far too large piece to swallow. As to groups like 21st Century Fox or CBS and Viacom, they remain controlled by a shareholder of a family. The last two, held by the family Redstone, are also in the process of considering a merger.
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Speed and precipitation
AT&T is not the only one to be looking at Time Warner. In 2014, the 21st Century Fox has already offered to buy the group for $ 80 billion. But the CEO of Time Warner, Jeff Bewkes, had rebuffed the advances of Rupert Murdoch, considering that his strategy was sufficient to overcome the challenges of the sector. To stem the competition from streaming services, like Netflix, which is eating market share in the pay-tv service, Time Warner has recently launched its own streaming service. At the same time, the group is conducting a severe restructuring in order to maintain its investment capacity in the content. But the quest for Mr. Bewkes to remain independent led to a bronca on the part of some shareholders who felt, on the contrary, that it was the right time to sell.
therefore, AT&T knew that there was no time to take if he wanted to take control of Time Warner, while putting the price. The pressure is up a notch when, a few weeks ago, Mr. Stephenson has learned that Apple was interested also in the folder, as did The Wall Street Journal.
AT&T is he trying to confuse speed and haste ? Because if on the strategic plan of the redemption of Time Warner appears as relevant, the operation, however, is not without risk. First, the new set will be found at the head of a debt of more than $ 150 billion, for a yearly turnover of 175 billion. Then, the merge will be under a magnifying glass by the regulator of the us. In a recent note, analysts at Credit Suisse do not hide their skepticism.
” At best, we believe that a review is tedious to the uncertain result will give pause to both parties to consider reconciliation. At worst, it can act as a barrier to the operation that is proposed. “
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The uncertainty is so much greater that the FCC may be profoundly renewed after the u.s. presidential election of 8 November. It is therefore difficult at this stage to anticipate how the case will be reviewed in the coming months by the members appointed by the new majority.
The republican candidate, Donald Trump, has already set the scene, Saturday, pledging to derail the project if it gains access to the White House, considering that this kind of structure would result in too great a concentration of power. On his side, Hillary Clinton has promised she would strengthen the competition authorities in the event of victory.
The proposal of AT&T is yet another “incident” for Time Warner, whose history has been punctuated by marriages and separations. The group was set up in 1989 by the merger of the activities from the written press (Time Magazine, Fortune…) with the film studios of Warner. Seven years later, the group bought CNN’s Ted Turner, before merging with AOL in 2000. But, with the bursting of the Internet bubble, the operation turned into a nightmare. After having overpaid for its prey, Time Warner has been forced to cash out a loss of 99 billion. Finally, in 2009, Time Warner separated its cable company, Time Warner Cable, or titles of written press.
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