Merger of Possibilities?
Chances are that you’ve used AT&T in your life, whether it was at your friend’s house or your apartment. I personally use AT&T as my service provider, and it has worked very well. AT&T is known as one of the telecom giants in the United States, being the world’s largest telecom company and the second largest mobile service provider. AT&T fits into your portfolio as a dividend stock, but their questionable deals have come back to bite them.
On Monday, AT&T announced that they would spin off Warner Brothers Group and merge it with Discovery, creating one of the largest media companies in the US. The deal makes the company larger than Netflix and NBCUniversal, leaving them second in the media industry behind Disney. Both companies expect to cut annual costs by 3 billion, but the merger marked a sharp turn in AT&T’s approach.
AT&T jumped into the media industry with their 85-billion-dollar acquisition of Time Warner, which questioned many analysts. At the time, many were shifting to a cord-cutting attitude, opting for streaming services such as Roku. AT&T saw the media business to keep their phone business afloat by offering free access to media services such as HBO, but the merger signaled that things went differently. Time Warner, along with the acquisition of DirecTV, has left AT&T bleeding cash as their media experiment failed. They’ve had to invest billions into HBO, which has been successful, but it isn’t to the level of Netflix and Disney, which AT&T was hoping to penetrate.
However, the merger leaves Discovery in a good place. CEO David Zaslav has grown Discovery into a large player in the media industry, with their platform Discovery+ having 15 million streaming subscribers. The merger with AT&T’s Time Warner allows them to grow at a larger scale, and it gives Zaslav more to work with as Warner contains HBO and other major cable networks. Discovery can now become a behemoth in the game, running a major streaming service and popular cable networks, and AT&T can focus on what they’ve been good at, which is the telecom business. Overall, this deal was good for both sides as the merger can possibly save AT&T’s recent mistakes and grow Discovery into a major competitor in the media industry. What do you think about this merger?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
