With AT&T trying to convert itself into a media provider and move away from its traditional carrier-only business strategy, the latest report doesn't come as too much of a surprise and seems like a sensible move for AT&T. According to the report, heads of both AT&T and Time Warner have been meeting over the past few weeks in order to discuss a number of things which also included a possible merger of both companies in which AT&T would acquire Time Warner.
Although the talks are still in the early stages, it's claimed that no formal offer has been put on the table and neither company is at that stage yet, with current talks simply focusing on improving relationships between the companies. If AT&T does decide to go ahead with a buyout of Time Warner, it could be the perfect move to further catapult AT&T into the media provider market, something that would put it directly into competition with Verizon once again. If the buyout does go ahead, though, AT&T will need to be prepared to fork out a significant amount of money. After all, Time Warner rejected a $75 billion offer from 21st Century Fox two years ago, so AT&T's offer may need to be closer to the $90 – $100 billion mark, which would represent a significant markup over the company's current valuation of $67.5 billion according to its stock valuation.
AT&T's current portfolio includes last year's acquisition of DIRECTV last year for $48.5 billion which has helped the company expand its media offerings, but an acquisition of Time Warner would bring both HBO and Turner under AT&T's umbrella, meaning that company would have some significant content creators and providers on its hands. Valuation wise, AT&T's easily eclipses Time Warner's with a valuation of over $238 billion, but due to spectrum purchases as well as DIRECTV, the company has debts of over $120 billion, which could mean they could be presented with some difficulties when putting in a purchase offer.
Now although the report focuses on AT&T's potential acquisition of Time Warner, it's also rumored that Verizon could place a bid sometime in the future, something that could increase the tension and competition between both carriers and could force AT&T to place a stronger bid in order to guarantee that their rival's offer isn't accepted. Either way, though, both companies are placing themselves in direct competition due to their similar media-focused business strategies. It may still be some time before any kind of offer is made by AT&T, but the company will surely be eager to speed up the process in order to avoid an offer by Verizon.