â—ŽEvery reporter Sun Yuting intern reporter Cai Ding
On October 23, AT&T, the second-largest mobile operator in the United States, announced the acquisition of Time Warner, which had a total value of approximately $108.7 billion, the largest global acquisition in 2016. AT&T intends to combine its wireless, TV and Internet resources with Time Warner's video content and IP resources to provide users with better quality and more content services.
As a wireless communications company, why does AT&T want to own Time Warner? In the face of many interesting potential investors such as Apple, why did Time Warner choose AT&T? Yesterday (October 25), AT&T spokesperson Jaquelyn M. Scharnick accepted an exclusive interview with the Daily Economic News, and for the first time responded to the original intention of the acquisition and the planned empire.
Recently, the old telecommunications service giant AT&T Inc. announced that it has acquired US media giant Time Warner Inc. in the form of cash and stock of about $110 per share.
Time Warner has a range of coveted star assets, including paid limited TV channels HBO, CNN, Warner Bros. Studios and DC Comics (with well-known IP such as Batman).
At present, the two sides have basically reached a merger agreement. It is reported that the total value of the transaction, including Time Warner’s net debt, is approximately $108.7 billion. Upon completion of the transaction, Time Warner shareholders will hold 14.4% to 15.7% of AT&T shares. There is no doubt that this is the largest M&A transaction in the world to date in 2016.
After the completion of the acquisition, the traditional telecommunications giant AT&T will be “transformed†and realize the transition from a single content distributor to content production and distribution, thus breaking the boundaries of content production and distribution.
The marriage of these two veteran giants is not only the olive branch of the $100 billion market value of "whales" (AT&T) to the billion-dollar "Time Warner", but also the market to see the "old" under the Internet era. The opportunity of a new look.
Holding a few "golden signboards": Time Warner becomes a hot commodity
Time Warner, which owns HBO, film and television producer Warner Bros., CNN, DC Manga and other "golden signboards", has always been the target of the American business community.
In 2014, media tycoon Murdoch’s 21st Century Fox issued a $80 billion offer to Time Warner, but it was rejected by Time Warner. In May of this year, the market once again exposed that Tim Cook’s Apple company showed interest in Time Warner.
Overall, Apple's 2/3 revenue comes from the iPhone, but the remaining 1/3 of its revenue comes from Apple's current fastest growing branch, iTunes and Apple Music. In addition, Apple is ready to start providing Internet TV services to users, and to create their own programs for users to choose. It seems that Apple’s acquisition of Time Warner’s entry into the media industry is not unthinkable.
However, this acquisition has not gone too far: the discussion between Apple and Time Warner seems to be only in the "initial stage." But Apple is still monitoring AT&T's acquisition of Time Warner.
Why has Time Warner been sought after by the "big guys" in American business? Jae Cook Lee, an associate professor at the Indiana University Bloomington School of Communication, said in an interview with the Daily Economic News that "in fact, the US media industry is controlled by several media empire. These so-called media empire control the content. The whole process of production to distribution and distribution. Time Warner is a typical example. They have their own movie studios, Warner Bros., CNN and HBO. Time Warner is the leader in the cable TV industry and also Comcast ( The most important competitors of US cable operators. From content production (Warner Brothers, HBO, CNN) to product launch (Time Warner Limited TV), Time Warner has already completed vertical integration in the media industry."
This may also explain why, five months after the news of Apple’s “dark autumn waveâ€, US telecommunications giant AT&T suddenly announced its marriage with Time Warner.
AT&T acquired Time Warner in cash and stock, equivalent to an acquisition price of approximately $107.50 per share, including Time Warner's debt and cash, which totaled $108.7 billion, the largest M&A deal since 2016.
AT&T is currently the top telecom operator with US market share. As of Monday (October 24), the market value was $226.8 billion, and the market value of Time Warner was $67.5 billion. Such a large-scale acquisition can be described as "whale swallowing."
"According to outside speculation, in addition to Apple, there are several companies interested in the acquisition (Time Warner). So if AT&T wants to acquire Time Warner, then they must complete the transaction as soon as possible." Bernstein Research Todd Juenger, vice president and senior analyst of the hospital, said.
Telecom giant transformation: competing for content control
AT&T is not fighting alone.
Looking at the US telecommunications industry, AT&T competitors, Verizon, the largest telecommunications company in the United States, are also on the road to the acquisition of Internet companies. However, compared to AT&T, Verizon's acquisition seems to save a lot of money - $4.4 billion to acquire the established portal AOL, and 4.8 billion to acquire Yahoo's core portal and search engine business.
For these transactions, Verizon has publicly stated that as the telecommunications market becomes saturated and competitive, companies will receive more revenue from Internet content and online advertising.
"These (cross-border acquisitions) fully illustrate Verizon's strategic shift," said Craig Moffett, an analyst at the Moffett Nathanson Institute. "Verizon is trying to define wireless communications in a whole new way, and they want to advertise now. Make money, not the user pays for the service."
If you look further ahead, the merger of cable operator Comcast, which is responsible for content distribution and distribution, and NBC Universal (content production) will also make the giants vying for content control.
As early as December 2009, Comcast of the United States expressed its intention to acquire NBC Universal from General Electric. In the same year, Comcast took the lead in acquiring 51% of NBC Universal. The transaction then proceeded smoothly. On February 19, 2013, Comcast acquired the remaining 49% of NBC's global share for US$16.7 billion. Through this acquisition, Comcast has opened up new revenue channels and achieved revenue through the distribution of premium content and content.
From Comcast to Verizon to AT&T, traditional content distributors such as telecommunications and cable operators are moving into content and media.
“AT&T is a mobile phone operator with a national infrastructure and cellular network. AT&T also wants to make money from media content (and the advertising revenue that content can bring). In the future, we will be able to see more in the media and mobile. Many different types of integration," said Jae Cook Lee.
According to an analysis released jointly by Baker & McKenzie and the Oxford Economic Research Institute in London, as the media industry's consolidation and innovation needs continue to increase, the TMT industry will continue to experience similar acquisitions and acquisitions by 2020. The report pointed out that in the five years from 2015 to 2022, there will be a total of 2.6 trillion US dollars in mergers and acquisitions; as large enterprises gain market share through mergers and acquisitions, this figure will reach 492 billion US dollars in 2018.
If the acquisition is successful, AT&T will become a hot film and television program with tens of millions of pay-TV, mobile and Internet users.
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