AT&T acquires Time Warner for a total of $108.7B

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After several months of negotiations, AT&T acquires Time Warner for over $80 billion.

CEOs of both AT&T and Time Warner shook hands on a deal that’s been in the rumor mill for some time. Randall Stephenson (Time Warner) and Jeff Bewkes (AT&T) have managed to bring together two companies with similar goals: market saturation.

AT&T is obviously known more for its telecommunication services, but with Time Warner on their side, AT&T plows its way into another realm of business.

The financial implication of an AT&T-Time Warner deal is a higher stock value for Time Warner. In fact, Time Warner shares soared over 10-percent, but AT&T itself dropped three points. AT&T, on the hand, suffered a slight dip in market value once gossip broke out. Either way, stocks will be priced between $105-110 once finalized.

Time Warner CEO Randall Stephenson offered a statement about the marriage (via Variety):

"“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. Premium content always wins. It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen. We’ll have the world’s best premium content with the networks to deliver it to every screen. A big customer pain point is paying for content once but not being able to access it on any device, anywhere. Our goal is to solve that. We intend to give customers unmatched choice, quality, value and experiences that will define the future of media and communications.”"

One major setback for most merger-acquisitions of this magnitude is government interference. The FCC and Dept. of Justice will be responsible for approving the deal. The problem ahead lies in fair play between businesses. Since Time Warner owns HBO, shows like Game of Thrones will be affected. AT&T plans to make it more complicated for non-AT&T customers to watch the show. That said, mergers are often looked at as a problem child.

When Comcast merged with NBC Universal in 2011, Comcast was accused of violating the agreement. According to Ars Technica, the error on Comcast’s part deals with reaching out to “neighborhoods” outside of NBC-owned Bloomberg TV. And this is why some don’t love the AT&T-Time Warner merger. Either company could take advantage of the other, spoiling the overall intention of the relationship. If that’s the case, there is a “break-up” fee that’s estimated in the millions.

The merger with Time Warner comes a year after AT&T bought out DirecTV for $48.5 billion. A deal that was more logical, customers at both companies reaped the benefits of streaming services.

It’s clear that AT&T wants to broaden its customer base. By having the good graces of DirecTV and now Time Warner, the sponsor behind the Dallas Cowboys’ snazzy new home will see exponential growth. But it should also scare AT&T’s main rival, Verizon Wireless. Even though Verizon offered to merge with Yahoo! for $4.4 billion, that may not happen, since Yahoo’s in its own turmoil following another data breach.

AT&T wasn’t the only interest of Time Warner’s. Comcast and Apple both pledged their allegiance to Time Warner because of its portfolio. However, neither of them followed through. After waiting a year for approval from the FCC, Comcast dropped out. Meanwhile, Apple was passively standing by to hear word of AT&T’s progress.

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Regardless of its drop on Wall Street, AT&T is the victor of this deal. With Time Warner’s stakes in HBO, CNN and Turner Sports, AT&T just walked into a buffet.

As a result of the new partnership, AT&T CEO Jeff Bewkes will step down.

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