AT&T confirmed over the weekend that it will be acquiring Time Warner for a sum of $85.4 billion, which makes it one of the most expensive acquisitions in history. The merger will be done via a half stock, half cash deal, and both companies are expecting the acquisition to be finalized by the end of next year.
If regulators approve this deal, it would mean that AT&T would gain ownership of Time Warner’s treasure trove of content, which includes CNN, HBO, Cartoon Network, Adult Swim, Warner Bros, New Line Cinema, TNT, and TBS.
This merger would definitely serve as a means for AT&T to diversity its business, morphing from a telecommunications company to a media conglomerate. But it could also be a way for the wireless carrier to inject some robust growth in its core wireless phone business, which appears to be ailing recently.
According to the latest quarterly results published by AT&T, it turns out that the second biggest mobile operator in the United States hast lost 268,000 postpaid phone customers during the third quarter of this year. This hurts because these are the types of customers that pay at the end of the month and tend to be more loyal compared to prepaid. For Q3, AT&T only managed to add 50,000 total postpaid customers, and this figure already includes tablet additions. Now compare that with the numbers from last year’s third quarter, which saw the wireless carrier register 289,000 postpaid phone customers.
Along with industry leader Verizon Wireless, AT&T is beginning to feel the pressure from rival carriers such as T-Mobile and Sprint (respectively, the third and fourth biggest mobile operators in the US wireless market). During the past few months, both T-Mobile and Sprint have been very aggressive in offering half off special offers and freebie deals, in a concentrated effort to grab away existing subscribers of Verizon and AT&T. And it appears to be doing its job -- the Big Red has also reported losing postpaid subscribers during the most recent quarter.
Is acquiring Time Warner the answer to all of AT&T’s problems? Not really, but it would certainly help. Mobile users nowadays are no longer just content with having a wireless plan, they also want to have access to all sorts of media content made easily available with the advances in LTE technology. In other words, people are no longer just making calls and sending text messages using their mobile devices, they are also watching more movies, TV shows, news, and other media. And with Time Warner in its arsenal, AT&T is in a better position now to offer more content than ever, certainly more expansive than what its DirecTV acquisition can deliver. And with more content, AT&T can retain more of its subscriber base, and maybe even attract new sign ups or recover the customers it had lost to competitors.
