AT&T at this time introduced it can spin off WarnerMedia—together with HBO and Warner Bros.—into a brand new firm, lower than three years after AT&T purchased Time Warner Inc. for $108 billion.
AT&T mentioned it struck a take care of Discovery, Inc. to mix WarnerMedia and Discovery’s belongings right into a “standalone global entertainment company.” AT&T would obtain $43 billion within the all-stock transaction by way of “a combination of cash, debt securities, and WarnerMedia’s retention of certain debt.” AT&T shareholders would obtain inventory in 71 p.c of the brand new media firm, whereas Discovery shareholders would personal the opposite 29 p.c.
AT&T expects it to take a full yr to finish the spinoff and mixture with Discovery. “The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals,” AT&T mentioned.
AT&T says it can shift its personal focus again to broadband.
“For AT&T shareholders, this is an opportunity to unlock value and be one of the best capitalized broadband companies, focused on investing in 5G and fiber to meet substantial, long-term demand for connectivity,” AT&T CEO John Stankey mentioned. “AT&T shareholders will retain their stake in our leading communications company that comes with an attractive dividend. Plus, they will get a stake in the new company, a global media leader that can build one of the top streaming platforms in the world.”
The as-yet-unnamed WarnerMedia/Discovery firm will encompass over 100 manufacturers, together with “HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC, Animal Planet, ID and many more,” AT&T mentioned.
Telecom giants’ media bets failed
Today’s AT&T announcement comes simply two weeks after Verizon mentioned it agreed to promote Yahoo and AOL for $5 billion to private-equity agency Apollo Global Management. The telecom giants’ bets on the media enterprise have not paid off as they hoped, however AT&T’s funding in media was a lot larger than Verizon’s.
Today’s announcement “is an admission that putting a large content asset with a wireless phone company had few long-lasting synergies,” CNBC wrote. “If anything, WarnerMedia became an albatross on AT&T shares, which have underperformed Verizon and T-Mobile since the deal’s completion date on June 14, 2018.”
AT&T’s Time Warner and DirecTV acquisitions have been each made beneath Stankey’s predecessor as CEO, Randall Stephenson.
Massive layoffs after AT&T/Time Warner merger
AT&T eradicated about 45,000 jobs throughout its media and telecom divisions after shopping for Time Warner. AT&T had 273,210 staff instantly after shopping for Time Warner in mid-2018 and simply 228,470 as of March 31, 2021.
Stephenson had claimed that AT&T would create “7,000 jobs of people putting fiber in [the] ground” in alternate for a giant company tax minimize. AT&T continued laying staff off as a substitute, hurting its capability to increase its fiber community and keep its legacy copper community. A report commissioned by the California state authorities discovered that AT&T let its copper cellphone community deteriorate by way of neglect, particularly in low-income communities and areas with out substantial competitors, regardless of elevating its cellphone costs by 152.6 p.c over 12 years.
With AT&T retaining its core telecom enterprise, the corporate mentioned the deal “results in two independent companies—one broadband connectivity and the other media—to sharpen the investment focus and attract the best investor base for each company.” With $43 billion coming again to AT&T, the telco mentioned will probably be “one of the best capitalized 5G and fiber broadband companies in the United States.”
The WarnerMedia/Discovery firm “will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices,” the deal announcement mentioned. Stankey mentioned that the deal “will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies [that] can be re-invested in producing more great content to give consumers what they want.”
Discovery CEO David Zaslav is anticipated to steer the brand new media firm after the deal closes. “The new company’s Board of Directors will consist of 13 members, 7 initially appointed by AT&T, including the chairperson of the board; Discovery will initially appoint 6 members, including CEO David Zaslav,” the announcement mentioned.
In February, AT&T introduced a deal to promote a minority stake in DirecTV and spin it out into a brand new subsidiary. In that case, AT&T will personal 70 p.c of the spun-off DirecTV firm.
AT&T plans extra fiber enlargement
After offloading WarnerMedia in mid-2022, AT&T mentioned it plans “increased capital investment for incremental investments in 5G and fiber broadband,” with annual capital expenditures of round $24 billion. AT&T slashed capital expenditures the final couple years; after spending $21.25 billion in 2018, AT&T spent $19.64 billion in 2019 and $15.68 billion in 2020. AT&T just lately mentioned it plans $17 billion in capital expenditures in 2021.
“AT&T expects its 5G C-band network will cover 200 million people in the US by year-end 2023,” and “the company plans to expand its fiber footprint to cover 30 million customer locations by year-end 2025,” AT&T mentioned at this time. Those 30 million places would come with each houses and companies.
In March, AT&T mentioned it “plans to increase its fiber footprint by an additional 3 million customer locations” in 2021. There are tens of hundreds of thousands of houses missing fiber entry in AT&T’s 21-state wireline territory. In October 2020, the Communications Workers of America union informed us that 14.93 million out of 52.97 million households in AT&T’s home-Internet service space had fiber-to-the-home entry. AT&T has ignored rural areas in its earlier fiber buildouts, and the three million new places this yr are all deliberate for metro areas.