Time Warner in international markets
AT&T (T) has stated that the acquisition of Time Warner (TWX) would result in Time Warner representing around 15.0% of revenues for the combined company. It would be due to the diversity of premium content offered by Time Warner both in the United States and in Latin America. Now let’s look at why AT&T considers Time Warner’s popularity in Latin America a big win for the combined company.
Time Warner’s HBO (Home Box Office) comprised around 20.0% of Time Warner’s total revenues of $7.0 billion in fiscal 2Q16. In international markets, HBO and Cinemax generate a majority of their revenues through subscription to its OTT (over-the-top) services or through “premium pay and basic tier television services to international affiliates.”
In fiscal 2Q16, HBO’s revenues rose by double digits in its international markets, indicating the popularity of its content. Given the rising popularity of its content internationally, the company is now set to launch HBO Now in Argentina, Spain, and Brazil later this year.
AT&T in Latin America
AT&T has acquired a significant footprint in Latin America after its acquisition of DirecTV. In fiscal 3Q16, AT&T’s DirecTV pay-TV operations in Latin America had revenues of $1.3 billion, a rise of 6.0% quarter-over-quarter.
However, the company’s pay-TV subscriber base fell 48,000 in fiscal 3Q16. Time Warner’s acquisition by AT&T would result in combining Time Warner’s premium content with DirecTV’s pay-TV operations in Latin American markets, which could boost its pay-TV subscriber base.