AT&T Announces Deal to Acquire Time Warner for $85.4 Billion

AT&T has reached an agreement to acquire Time Warner for $85.4 billion, combining the telecom and entertainment companies to create a media giant.

The deal would combine Time Warner's vast library of content, which includes networks like HBO and CNN, with AT&T's large number of wireless and pay TV subscribers, creating a partnership with a company that distributes content and one that produces it.

“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,” Randall Stephenson, AT&T chairman and CEO, said in a press release. “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."

Stephenson would head the new company. Time Warner Chairman and CEO Jeff Bewkes would stay for an interim period once the deal is closed to help with the transition.

The deal still has to be approved by regulators, an acquisition that the New York Times described as among the biggest and most important regulatory cases to await the next administration. The Times notes that the Comcast acquisition of NBC Universal is likely to be used as a lens to examine the deal. Republican presidential nominee Donald Trump has already spoken out against the deal, while Hillary Clinton has promised to be "tough on business."

The Associated Press reported that even if the acquisition overcomes opposition from regulators, there might be so many conditions attached that it no longer makes sense.

ABC News reported that the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights will hold a hearing on the purchase in December.

Consumer advocate groups have spoken out against the deal, arguing that such synergies end up costing consumers more and lead to less options for them.

"Any time you hear media executives talking about synergies, throwing around the business-babble that always accompanies these rumors, you know it’s time grab your wallet and hang on tight. Big mergers like this inevitably mean higher prices for real people, to pay down the money borrowed to finance these deals and their golden parachutes. The deals are driven by Wall Street’s insatiable desire for short term growth at any cost. And just as AT&T’s recent purchase of DirecTV was quickly followed by price hikes, there’s every reason to expect this potential tie-up would cost internet users and TV viewers dearly too," Matt Wood, policy director of the consumer advocacy group Free Press, said in a statement when the deal had not yet been finalized.

Wood added it was a good thing lawmakers have a renewed interest in addressing the merger and that there were solid Net Neutrality rules that had been established. One of the main concerns Wood addressed in the statement was the possibility that AT&T would favor its own content and deny programming to other distributors. The Times reported that such fears could be addressed in conditions attached to an approval from lawmakers.

In a conference call Saturday, Stephenson said AT&T wasn't eliminating a competitor but rather buying a supplier.

“Any concerns by the regulators we believe would be adequately addressed by conditions,” he said.

The deal is easily considered one of the largest media transactions in recent history.

Image Credit: Mike Mozart via Flickr Creative Commons