The film and video production could help AT & T but will skyrocket the debt…
The motion of AT and T to buy Time Warner seems to be smart, strategically, given the way in which evolves the current ecosystem of entertainment and communications.
The big questions, however, relate to the financial aspects of the agreement.
The ATandT the discretion to spend 80 to 90 billion dollars to buy the shares of Time Warner and a further 22 billion dollars for you to take the weight of the debt of Time Warner that is pending?
AT&T has just completed the absorption of DirecTV, an acquisition of € 49 billion. dollars, and at the same time increasing the publications that bring the AT and T a step before the takeover of Time Warner. This is the company that owns the film studio Warner brothers and popular cable channels such as TNT, CNN and HBO.
Some analysts are questioning whether there is a strategic logic to the deal. The truth is, however, that such a combination of platform, mobile and fixed network of AT&T with the entertaining trademarks of Time Warner would be a perfect fit, business.
The existing platform network of AT & T is facing a variety of threats. One of these is that the customers of mobile could shift to competitors such as Verizon and T-Mobile, and Comcast (of time).
But on the video front are observed growing threats. The services of cable and satellite tv AT and T have a combination of over 25 million subscribers. This makes AT & T the largest provider of pay-tv in the united states, which means that the company is in danger from the phenomenon of withdrawal of subscribers and cease to use cable television – also known as ‘cord-cutting’.
At the same time, the size of AT&T in the field of television means that the company is facing risks from the growing costs of obtaining a licence for transmission of all these cable channels, sports events, and other programs that customers wish to see.
The agreement for the acquisition of Time Warner helps address all of these threats.
However, the deal seems shaky, financially. After buying DirecTV, AT&T has a debt of $ 10 billion to be repaid within one year, and other 117 billion dollars μακÏοπÏÏŒÎ¸ÎµÏƒÎ¼Î¿Ï debt and has just $ 7 billion in cash.
The financial details of the acquisition of Time Warner have not been announced yet, although analysts expect that AT & T will use a mixture of equity and debt in order to pay the price of the agreement. The more debt used, the less shares we have to issue the easier it will be for the deal to start adding to earnings per share of AT&T’s.
However, more debt could mean a further degradation of the credit rating of the company at the level of ‘junk’, thus increasing the cost of borrowing.
Finally, there is a political dimension in the agreement. A government Donald Trump will not allow the completion of the agreement, in accordance with what he himself has said the Trump. And can Hillary Clinton has not raised the issue, but in the past he had committed that he will turn against the corporate mega-mergers. So, the political climate seems to be negative as to the agreement.
In any case, it remains to be seen if the bet of the agreement, AT & T and Time Warner will be successful, given the financial and other risks.
Source
The Big Deal: it’s Worth Time Warner’s 80 – 90 billion. dollars?
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