​Jeff Kagan: Thoughts on AT&T, Time Warner Merger

Jeff Kagan  |

So AT&T (T) is going to be acquiring Time Warner (TWC). What does that mean going forward for AT&T, for Time Warner, for investors, customers and the competitive marketplace? Also, will this deal be approved or blocked by regulators, and the federal government? And let’s take a closer look at this brand new company called AT&T and see how they are growing and changing.

First, it’s important to realize that it’s not just AT&T that is changing. The entire industry is growing, changing and transforming. In fact, many industries are growing and changing thanks to new technology and new ideas. If companies were private, they might be very happy carving out their slice of the pie. However, public companies need to show continual growth or they lose investor interest.

That’s why public companies always seem to be innovating. That’s why Apple (AAPL) invented the iPhone and Google (GOOG) the Android. That’s why we see companies like AT&T, Verizon (VZ), Comcast (CMCSA) and Charter (CHTR) trying to reinvent their playing field and accelerate their growth going forward.

Sometimes companies lead. Other times they follow. AT&T is a leader. I attended the AT&T Industry Analyst Summit a couple weeks ago. That is their annual get together where they explain where they were, where they are, and where they are heading.

They talked about growth. About last year’s acquisitions of DirecTV and the Mexican wireless company. They talked about creating new slices of the TV pie with their mobile TV offering over the wireless network. They even looked ahead talking about AI, VR, IoT and much more.

IBM World of Watson

IBM asked me to speak at their conference, IBM World of Watson (IBM), this week in Las Vegas. I would like to address this merger in my remarks. I will also be talking about AI from the perspective of wireless, telecom, television and the Internet. AI and all the companies that need to link every person with every company and every network, everywhere.

That’s a huge growth opportunity for AT&T and every one of their competitors as well. AT&T is always looking for new paths for growth. They are one of the most aggressive, growth oriented company in the space.

AT&T has always been a communications network company. At their analyst meeting they told us that is changing and expanding. Going forward, they think of themselves as a technology company. In that world, this merger with Time Warner makes perfect sense. AT&T is expanding beyond networks and communications technology to the content side. And they aren’t the only company heading in this direction.

Since Comcast NBC Was Approved, AT&T Time Warner Should Be Approved

AT&T is on a journey of growth. They have to be admired for their vision and persistence. However, AT&T is not alone. Comcast was just a cable television company until they acquired NBC a few years ago. Now, Comcast is in the content business as well. Since no one stood in the way of the Comcast-NBC merger, I don’t expect anyone to stand in the way of the AT&T-Timer Warner merger either.

The only way this deal could be denied is if Comcast-NBC were broken up as well for the same reasons. That’s why I am confident this deal will be approved. There are only a few, very large companies capable of such a merger and transformation.

How AT&T Will Grow Time Warner


So AT&T is growing beyond a provider of communications services. They are moving into content as well. This is a huge growth opportunity. Traditional thinking from today’s content providers has stalled. I see AT&T thinking reigniting growth at Time Warner the same way they did with DirecTV and mobile wireless. New thinking. New ideas. Growth.

Like it or not, the communications industry continues to grow and to change. I expect to see other, similar mergers in the near future as well. Perhaps not many, because there are not that many huge players, but this is the direction the industry is heading... and it has been heading in this direction for the last few decades.

Communications Industry Continues to Grow and Change

Let’s pull the camera back and take a look at how the communications industry has changed. Around twenty years ago, every sector was completely separate. We had local phone, long distance phone, wireless, Internet, cable TV and more. Then in the 1990’s, the walls separating these sectors disappeared. Bit by bit companies started expanding into other sectors.

That had ripple effects that transformed the industry. Today, single sector companies are history. Back then there were seven baby bells, three large long distance competitors, dozens of smaller wireless companies, dozens of smaller cable television companies, the Internet was brand new and companies like Prodigy and America Online lead the way.

Today, the world is completely different. Today, there are fewer and larger competitors that compete in many spaces. And that reality continues to grow and change the industries and the companies.

The iPhone and Android were only invented a decade ago. That’s when the speed and the capacity of the wireless data network was tiny. Today, we can watch live TV on our smartphones. Today it continues to grow with AI like Apple Siri, Google Now and Microsoft Cortana (MSFT), IBM Watson and more will continue to roll out.

Innovation and advancement are what we are all about. That’s why Comcast acquired NBC. And that’s why AT&T is acquiring Time Warner. So the question is: Who’s next?

Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at jeff@jeffKAGAN.com. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan


DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Companies

Symbol Name Price Change % Volume
TWC Time Warner Cable Inc n/a n/a n/a 0 Trade
CHTR Charter Communications Inc. 440.05 -1.88 -0.43 821,667 Trade
VZ Verizon Communications Inc. 61.05 0.64 1.06 12,346,320 Trade
GOOG Alphabet Inc. 1,245.49 -7.58 -0.60 1,352,839 Trade
T AT&T Inc. 38.47 0.66 1.75 37,673,766 Trade
CMCSA Comcast Corporation Class A Common Stock 45.57 -0.36 -0.78 13,553,877 Trade
AAPL Apple Inc. 236.41 1.13 0.48 24,377,166 Trade

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