AT&T’s deal with Time Warner
In 2016, AT&T (T) announced a definitive agreement to acquire Time Warner (TWX) in a stock-and-cash transaction valued at $107.50 per Time Warner share. Time Warner has high-quality content assets, and AT&T has extensive customer relationships across wireless, video, and fixed broadband platforms. The deal will create a vertically integrated company with “best-in-class” assets in content and distribution that could help grow AT&T’s long-term earnings.
During AT&T’s recent 1Q17 earnings conference call, AT&T’s management stated, “On the Time Warner deal approval, it’s moving along as expected. The European Commission has approved it. The Department of Justice is now reviewing it, and we’re working closely with them to answer any questions that they may have.”
The fact that no licenses are being transferred eliminates the FCC’s (Federal Communications Commission) jurisdiction for reviewing the deal on its own. As a result, AT&T still expects approval of the deal this year.
Creating new revenue streams
The graph above shows AT&T’s revenue in the last five quarters. AT&T reported revenue of $39.4 billion in 1Q17. The acquisition of Time Warner could be another attempt by AT&T to pursue revenue growth outside its traditional carrier business where competition has become more intense. Smaller carriers T-Mobile (TMUS) and Sprint (S) have stepped up competition for subscribers with aggressive pricing techniques.