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AT&T to buy Time Warner for about Rs 5.7 lakh crore

24-October-2016
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AT&T to buy Time Warner for about Rs 5.7 lakh crore

Telecommunications giant AT&T agreed on Saturday to buy Time Warner for about $85.4 billion (approximately Rs 5.7 lakh crore).
 
According to reports, AT&T and Time Warner said both of their boards unanimously approved the deal. The companies will close the deal by the end of 2017, after the US Department of Justice reviews it.
 
While Time Warner Chief Executive Jeff Bewkes will stay with the company for a short period to help with the transition, AT&T Chief Executive Randall Stephenson will head the new company. The companies said they would introduce an online video package similar to a traditional pay television package to attract subscribers. “It will disrupt the traditional entertainment model and push the boundaries on mobile content availability for the benefit of customers,” the companies told The Wall Street Journal.
 
Moving far away from one of the biggest merger follies of all time, when Times Warner sold itself to AOL at the height of the dot-com boom, this time, the rise of online outlets like Netflix, Amazon Prime and YouTube and the shift of younger customers from traditional media have pressured media companies to seek out consolidation partners, says a report in The New York Times. The report goes on to say that these media companies are anticipating drops in fees from cable service providers and declining revenue from advertisers. Getting bigger would give them more negotiating leverage with both service providers and with advertisers.
 
However, Time Warner’s deal with AT&T is likely to face tough scrutiny from government regulators increasingly skeptical of power being consolidated among a few titans. Donald J. Trump, the Republican nominee for president, indicated on Saturday that he would seek to block the merger if elected “because it’s too much concentration of power in the hands of too few.”
 
The New York Times goes on to say that over the last decade, Time Warner has spent significant time selling or spinning off AOL, many of the Time Inc. stable of publications, and Time Warner Cable, which was sold to another cable operator. The remaining businesses are HBO, one of the most-admired pay-TV channels; Warner Bros. movie studios; and cable channels that include CNN, TNT, Turner Sports and TBS.
 
Saturday’s agreement serves as validation of sorts for Bewkes after all the tough questions he faced two years ago when he turned down 21st Century Fox’s bid of $85 a share, arguing that the offer sharply undervalued his company.
 
AT&T is willing to offer significantly more — $107.50 a share in cash and stock. AT&T’s offer represents a roughly 35 per cent premium to where Time Warner’s stock was trading before news reports of the merger talks emerged, says The New York Times.
 

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