Prior to Donald Trump receiving the presidential vote, AT&T was set to buy out Time Warner Inc. for $85.4 billion, effective by the end of 2017.
AT&T, the popular wireless carrier provider, has made statements announcing their intention to buy-out Time Warner Inc. The merger was set to be finalized by the end of 2017. The deal would require government approval through the consent of the Federal Communications Commission (FCC).
Time Warner Inc. (TWX) is a different organization from the similarly named Time Warner Cable (TWC). TWX is a multimedia company which owns HBO, Castle Rock Entertainment and others, whereas TWC provides cable services, Internet and phone services. The purchase of TWX would add another dynamic to the services that AT&T already offers.
AT&T would initiate this merger, commonly being referred to as a “mega-deal,” in order to create competition with Verizon, the nation’s largest wireless carrier, who also recently acquired the majority of Yahoo’s shares. Verizon currently offers a service called Go90, which operates similarly to other online streaming services by allowing users to view popular TV shows online, as well as series that are exclusive to Go90 subscribers. AT&T’s proposed merger with TWX would allow them to offer new technologies both similar to and far above Go90. Consumers have concerns about the merger, saying that it creates the opportunity to increase prices for access of HBO, CNN and other select channels.
President-elect Donald Trump said during his campaign that if elected, he would not approve the merge and would do as much as possible to stop it in order to limit, “too much concentration of power in the hands of too few.” AT&T Chief Executive Randall Stephenson worked to dispel these concerns in an interview Sunday, where he maintained that AT&T’s main goal is to create next-generation technology, such as 5G connections, which could provide high-speed broadband and television services.
“From a company perspective, we really look forward to working with President-elect Trump and his transition team,” said Stephenson after the final election results were made public. “Our Time Warner transaction is all about innovation and economic development, consumer choice, and investment in infrastructure with regard to providing a great 5G mobile broadband experience. So we look forward with optimism to working with the leadership and providing benefits to consumers and to our shareholders.”
TWX’s stock has dropped since news of the merger broke, while AT&T’s stock is still climbing. Prior to Trump’s criticism, AT&T agreed to paying $500 million to TWX “in respect of its time and expenses” if the deal were to fall through.
If TWX were to go with a higher bidder or to back out of the merger for any reason, they have agreed to pay AT&T $1.725 billion. AT&T also agreed to retain the contracts of four TWX executives through Dec. 31, 2019 upon the passage of the merger. These contracts include provisions for payments in cash, as well as in the form of shares in the newly merged company.
The FCC would have to give approval along with the Department of Justice, and could be called on to help settle disputes between AT&T and its opponents.
