AT&T (T) wants to acquire Time Warner Inc ($TWX) for $85.4 billion. Over the past 72 hours, this has been the lead story in the financial media. People in favor of the deal argue the deal does not raise anti-trust issues because AT&T is a telecommunication company and Time Warner is primarily a media company. On the other hand, people against the deal say it is too big, not fair for the consumer, and it will give AT&T too much power. I'm not here to argue either side, I just want to shed light on the reasons why AT&T wants to acquire Time Warner and let you know that a company like this already exists in Canada (and many other parts of the world).
Canadian Precedent:
In Canada, the most well-known provider or your mobile, cable and internet needs is Rogers Inc (TSX: RCI.B). Rogers describes itself as: "We’re Canada’s dynamic communications and media company. We make sure you stay inspired, informed and in touch, with our advanced networks, powerhouse media brands and technologically advanced communications services. Our goal is to easily connect Canadians with what’s next." Ted Rogers, a Canadian entrepreneur, founded the company in 1960, and its roots were in radio. Over the past five decades, Ted grew Rogers into the converged media and communications powerhouse and has become a one-stop shop for all your needs. This business model, of being a one-stop shop, is a common in many parts of the world. Now, AT&T is trying to do it here in the U.S.
AT&T Needs to Grow:
AT&T needs to grow and it is having a hard time growing in the crowded telecommunication space. Back in 2011, AT&T tried to buy T-Mobile USA (TMUS) for $39 billion from Deutsche Telekom. The deal would have given AT&T nearly 34 million additional subscribers, but was blocked by regulators because of anti-trust issues. So, instead of buying another mobile carrier, AT&T decided to grow laterally and now wants to buy Time Warner. Time Warner is not a growth machine anymore but it does allow AT&T to add a ton of subscribers and capture market share. Additionally, from convenience stand-point it allows AT&T to increase its retention rate and that is tremendous for its bottom line. Customer loyalty is a very big deal for companies - both big and small. Those are just a few reasons why AT&T wants to buy Time Warner. Only time will tell if they are allowed to complete this transaction. Irrespective of the outcome, now we know a few reasons why they want to buy Time Warner.
