AT&T and Time Warner Inc. have made their rumored merger official, with AT&T to purchase the media company for $85.4 billion in cash and stock. The total transaction value is $108.7 billion when factoring in Time Warner's debt.
AT&T's announcement Saturday evening listed some of the many media properties the company will own if the merger is allowed by US regulators. Time Warner Inc. has been completely separate from its former subsidiary, Time Warner Cable (now owned by Charter), since 2009.
"Each of Time Warner’s three divisions is an industry leader: HBO, which consists of domestic premium pay television and streaming services (HBO Now, HBO Go), as well as international premium and basic pay television and streaming services; Warner Bros. Entertainment, which consists of television, feature film, home video and videogame production and distribution," AT&T said. "Warner Bros. film franchises include Harry Potter & DC Comics, and its produced TV series include Big Bang Theory and Gotham; Turner consists of US. and international basic cable networks, including TNT, TBS, CNN and Cartoon Network/Adult Swim. Also, Turner has the rights to the NBA, March Madness and MLB. Time Warner also has invested in OTT [over-the-top] and digital media properties such as Hulu, Bleacher Report, CNN.com and Fandango."
AT&T already is the largest pay-TV provider in the US thanks to last year's purchase of DirecTV. It is also the third largest provider of home Internet service after Comcast and Charter, and the second largest provider of mobile data and voice services after Verizon Wireless.
"Owning content will help AT&T innovate on new advertising options, which, combined with subscriptions, will help pay for the cost of content creation," AT&T's announcement said. "This two-sided business model—advertising- and subscription-based—gives customers the largest amount of premium content at the best value." AT&T also pointed out that Time Warner's business requires few capital expenditures and is lightly regulated, unlike much of AT&T's existing business.
AT&T intends to close the transaction before the end of 2017. It will require review by the US Department of Justice and possibly by the Federal Communications Commission. "AT&T and Time Warner are currently determining which FCC licenses, if any, will be transferred to AT&T in connection with the transaction," AT&T said. "To the extent that one or more licenses are to be transferred, those transfers are subject to FCC review."
As we noted in a previous story, owning Time Warner would give AT&T incentive to raise the prices its rivals (such as Comcast, Charter, and Verizon) pay to distribute Time Warner programming on their cable TV systems, which could indirectly raise consumers' TV bills.
AT&T could favor Time Warner video on its own networks by letting it stream without counting against the data caps applied to video services like Netflix. AT&T could also harm online video services that compete against DirecTV by charging higher prices for content or refusing to license videos.
“I'm skeptical of huge media mergers because they can lead to higher costs, fewer choices, and even worse service for consumers," Sen. Al Franken (D-Minn.) said today. "In the coming days, I'm going to be pressing for further details about this reported deal and how it would affect the American consumer, who deserves access to the content they want and whose pocketbook continues to be squeezed by rising cable and Internet costs.”
Republican Presidential nominee Donald Trump today said his administration would block the AT&T/Time Warner merger "because it’s too much concentration of power in the hands of too few."
Ars will have more articles on this merger in the coming days.
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