AT&T ditches media dreams as it spins out WarnerMedia

Communications group AT&T is spinning off its WarnerMedia business just three years after buying it. Matthew Partridge reports

When John Stankey became chief executive of AT&T last year, he promised to rethink the direction of the $230bn telecoms conglomerate, says Jennifer Saba on Breakingviews. This week he showed that he’s “keeping his word” by announcing that AT&T will be merging most of WarnerMedia, its news and entertainment division, with television network Discovery. AT&T will receive $43bn, while AT&T’s shareholders (not AT&T) will own 71% of the new company, which will be run by Discovery’s chief executive David Zaslav. AT&T shares rose by around 2% after the move was announced.

The deal marks an “embarrassing U-turn” for the group, which only created WarnerMedia three years ago when it splashed out $85bn on Time Warner, says Simon Duke in The Times. The idea was that the deal, which took more than two years and a court fight to get approved, would usher the television and movie industry into “the digital promised land”. In the end, it left AT&T “saddled with about $161bn in debt”, while also failing to “harness the potential of its media assets”, as TimeWarner was left behind by the rise of streaming services such as Netflix and Disney+.

Making the right decision

AT&T’s decision to get rid of Time Warner may be an admission of failure, but it is the right decision, says Dan Gallagher in The Wall Street Journal. After all, AT&T has a “pressing need” to invest in expensive technology like 5G to “keep its network business competitive”. That will be easier now that it doesn’t have keep up with the “billions being poured into new streaming content” by Disney, Netflix, Apple and Amazon. What’s more, “unwinding its largest acquisition to date” may also help snap it out of the “permanent deal mode” that it has been in since the late 1990s.

The deal also represents a big opportunity for Zaslav, says Tara Lachapelle on Bloomberg. This “king of trash TV” is now in charge of the HBO, CNN, TBS and TNT networks, the Warner Bros movie studio and the DC Comics superhero franchise. What’s more, he now has the opportunity to combine HBO Max and Discovery+ into “a streaming super-app” that could give Netflix Inc. and Disney+ “a run for their money”. While the new company “will be saddled with $55bn of debt”, Zaslav believes that by 2023 it will be generating $8bn of free cashflow, which should help it pay down borrowings quickly.

With Netflix’s subscriber growth “slowing” and the streaming market becoming “increasingly crowded”, the industry’s leaders “are still to be decided” and the new company “could prove to be a strong contender for the streaming crown”, says Ben Woods in The Daily Telegraph. However, it means that its competitors, including Comcast, are now faced with “a decision to make”. This is because many Comcast investors believe that it should follow suit and split its “huge broadband network” from its media empire which includes “not only Sky but NBCUniversal in America”.

Recommended

What is the pension lifetime allowance?
Pensions

What is the pension lifetime allowance?

If you have been saving into your pension for some time now - or were paying attention during Jeremy Hunt’s inaugural Budget - you may have heard the …
20 Mar 2023
Rightmove: UK house prices up £3,000 as property market rebounds
House prices

Rightmove: UK house prices up £3,000 as property market rebounds

Rightmove’s latest house price index shows the property market has been resilient despite an economic downturn
20 Mar 2023
How to get a council tax reduction
Tax

How to get a council tax reduction

Council taxes will go up next month, but some people can get a discount. We explain who can get a council tax reduction
17 Mar 2023
How much tax will you pay from April 2023?
Tax

How much tax will you pay from April 2023?

The Chancellor announced a series of tax changes and allowance freezes in his Autumn and Spring budget. We break down what these mean for you ahead of…
17 Mar 2023

Most Popular

Government plans could see NS&I boost interest rates
Savings

Government plans could see NS&I boost interest rates

The government-backed bank has a new funding target, which could prompt it to boost the rates on its Premium Bonds, ISAs and bonds.
16 Mar 2023
Share tips of the week – 17 March
Investments

Share tips of the week – 17 March

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
10 Mar 2023
How to make your child a tax-free millionaire by age 37
Investments

How to make your child a tax-free millionaire by age 37

Exclusive research for MoneyWeek reveals how funding an ISA and a pension for your child until age 18 could build up a seven-figure sum by the time th…
14 Mar 2023