AT&T-Time Warner deal
In 2016, AT&T (T) announced that it had agreed to acquire Time Warner (TWX) for $85.4 billion. AT&T has considerable customer relationships across the video, wireless, and fixed broadband platform, whereas Time Warner has high-quality content assets. As a result, the AT&T-Time Warner deal will create a vertically integrated company with premium content and an established subscriber base that could help grow AT&T’s long-term earnings.
During AT&T’s recent 2Q17 earnings conference call, AT&T’s management reiterated its confidence in closing the proposed acquisition of Time Warner before the end of the year. However, the timing continues to be up in the air given the current uncertainty surrounding the Trump administration, specifically with respect to the DOJ (Department of Justice). Further, the management highlighted that AT&T’s merger integration team was nearly complete and was already looking at opportunities to improve advertising, bundling, and customer choice.
Creating new revenue streams
The graph above shows AT&T’s total revenue in the last five quarters. AT&T generated total revenue of $39.8 billion in 2Q17. The acquisition of Time Warner could be another attempt by AT&T to pursue revenue growth outside its US wireless business where competition has become more intense. Smaller rivals Sprint (S) and T-Mobile (TMUS) have stepped up competition for customers with aggressive pricing techniques.