AT&T to acquire Time Warner in biggest buyout in U.S. history

Concerns over monopolization loom

Jeff Burnett, Staff Writer

AT&T, Inc. announced that it will acquire Time Warner, Inc. in a stock-and-cash transaction agreement valued at $85.4 billion, making it the third-largest media buyout in U.S. history.

The board of directors of both companies approved the agreement unanimously on Oct. 22 with a $107.50 per share offer for Time Warner.

The acquisition has to be approved by the Federal Communications Commission, a process that could take a year or more.

The deal would combine Time Warner’s media brands, such as Warner Bros. Entertainment (Warner Bros. Pictures), Turner Broadcasting Systems (CNN, HLN, TNT, and TBS), and HBO with AT&T’s DirecTV, mobile, and broadband platforms to create an all-in-one content and distribution company.

“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,” Randall Stephenson, AT&T chairman and CEO, said in a statement.

The newly combined company aims at converging Time Warner’s content with AT&T’s distribution to deliver “enhanced access to premium content” to consumers across multiple devices, providing more choices for mobile and streaming video services.

Ann Strahle, assistant professor of communication at UIS, said, “The argument is that this would be good for consumers because it would make more high-quality content available to stream on broadband at high levels, which is a constant demand by consumers.”

The converging of properties would give the company multiple revenue streams, with both advertising options and user subscriptions to offset the cost of content that “gives customers the largest amount of premium content at the best value.”

The new company plans on becoming the first U.S. mobile carrier to compete with the largest cable operators in the country, such as Comcast, Charter, and Cox, with offering bundles of mobile broadband and video.

Both presidential nominees, Donald Trump and Hillary Clinton, and Sen. Al Franken, D-Minn, have expressed concerns about the consolidation of media companies.

“The concern is whether, for example, DirecTV might favor Time Warner content, crowding out or refusing to carry alternative and independent programming that viewers might prefer,” Strahle said. “In essence, controlling content choices for consumers through the wallet.”

The proposed acquisition would be considered a “vertical merger” between both of the companies, which is combining two separate production models into one centralized company.

“Combining with AT&T dramatically accelerates our ability to deliver our great brands and premium content to consumers on a multiplatform basis and to capitalize on the tremendous opportunities created by the growing demand for video content,” Time Warner Chairman and CEO Jeff Bewkes said in a statement.

In November, AT&T is set to launch its over-the-top (OTT) service, DirecTV Now via mobile application and internet with over 100 channels of live and on demand streaming at a price point of $35.

In 2015, AT&T acquired DirecTV, the nation’s largest pay TV operator with 26 million subscribers, for $48.5 billion; AT&T is currently the second largest U.S. mobile carrier with over 100 million subscribers.

“We have seen more monopolization throughout the last 25 years and we will see more to come as long as our current deregulation policies stand,” Strahle said.

In 2014, 21st Century Fox submitted a cash-and-stock $80 billion offer for Time Warner, roughly adding to $80 per share, but failed at acquiring the company after Time Warner declined the offer.

AT&T ranked number 10 on the Fortune 500 list with revenues exceeding $140 billion and Time Warner came in at number 99 with over $60 billion in revenue.