AT&T-Time Warner deal
Last year, AT&T (T) made a public announcement that it has agreed to purchase Time Warner (TWX) for $85.4 billion. AT&T has strong customer relationships over its wireless, video, and fixed broadband platform, whereas Time Warner has premium content assets. So the AT&T–Time Warner deal could create a vertically integrated company with high-quality content and an established customer base that could help enhance AT&T’s long-term earnings.
During the Goldman Sachs Communacopia Conference on September 12, 2017, Randall Stephenson, AT&T’s chief executive officer, reiterated the company’s confidence that the proposed acquisition of Time Warner would close by the end of 2017. However, the timing could be affected by uncertainties in the Trump administration and specifically with the DOJ (United States Department of Justice). Management noted that AT&T’s merger integration team was nearly complete and already exploring opportunities to enhance advertising, bundling, and customer choice.
Diversifying revenue streams
AT&T’s total revenue over the past few quarters is depicted in the above graph. In 2Q17, it reported total revenue of $39.8 billion compared to $40.5 billion in 2Q16. The proposed acquisition of Time Warner is seen as one more attempt by AT&T to pursue revenue growth outside its US wireless business where competition has become tighter. Smaller rivals T-Mobile (TMUS) and Sprint (S) have stepped up competition for subscribers with disruptive pricing techniques.