Report: AT&T Buying Time Warner Due To Wireless Erosion

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There's not a lot of subjects on which Democrats and Republicans in the United States can agree on, but AT&T's attempt to acquire Time Warner seems to be one of them. As it turns out, everyone from Bernie Sanders to Hillary Clinton and the President-elect Donald Trump is either advising scrutiny of the potential merger or is outright calling for the Federal Trade Commission and the US Department of Justice to reject the deal. Antitrust debates aside, the latest report from the market analysis firm MoffettNathanson Research suggests that the second largest carrier in the country can hardly be blamed for trying to go into the media business.

Namely, senior analyst Craig Moffett asserted that AT&T doesn't have much choice but to try to diversify its operations following the saturation point which the US smartphone market reached in 2013. In addition to that, Moffett states that the wireless industry in the country isn't as differentiated as it used to be in terms of network quality, price, and smartphone selection. The latter playing field became especially even after the iPhone exclusivity deal between AT&T and Apple ended in 2011. A less differentiated market means each competitor has fewer options when it comes to attracting customers and that status quo consequently leads to stagnation regarding revenue. Well, stagnation is the best-case scenario, that is. In this particular instance, AT&T's wireless revenue is decreasing. That trend is the reason why AT&T acquired DIRECTV for $49 billion two years ago, and it's also likely the reason that the second largest carrier in the US now wants to purchase Time Warner for more than $85 billion.

In other words, AT&T wants to diversify its operations because that would diversify the company's revenue streams and create more room for potential growth. The so-called erosion of the wireless business means that the carrier must look for other business opportunities in order to keep shareholders happy. This is why AT&T is now ready to shell out a huge amount of money for Time Warner despite the fact that its expensive acquisition of DIRECTV was only completed last year and the company could certainly use some time to rebuild its cash reserves. However, as Moffett explains it, AT&T simply cannot afford to wait. Of course, whether the carrier actually manages to complete the transaction is another story.

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