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John Stankey, CEO of AT&T, was talking about the success of Godzilla vs. Kong monster movies last month, taking the box office and taking viewers to the HBO Max streaming platform to try to challenge the team to Netflix.
This week, he looked more like a regular telecommunications executive who described the company as a “credible opportunity” to increase its share of the broadband and 5G mobile services markets.
AT&T on Monday unveiled WarnerMedia, a content business it bought just two and a half years ago, worth $ 108.7 billion and to match WarnerMedia’s discovery.
The turn came two weeks after his rival Verizon pull the plug with the media’s own intentions, as they were born in 2015 when it paid $ 4.4 million to acquire AOL. At the turn of the century, the two components of AOL-Time Warner’s disastrous deal were bought and sold by two of America’s largest telecommunications companies in quick order.
The telecommunications sector has long been fascinated with Hollywood, thinking that the industry is more than just a collection of “dumb pipes” that act as a channel for value created by other companies.
The Spanish Telefónica made a nasty deal at the turn of the century to buy the founder of the Big Brother Endemol, while others built a sports broadcasting business, funded content studios, and acquired television channels.
However, convergence between telecommunications and the media comes at a high cost, and AT&T and Verizon, among others, have taken the idea that focusing on tubes may not be so dumb.
“It’s like cigarettes. Every 17 years, telecommunications companies strive to get into the media business, ”said Craig Moffett, an analyst at Moffett Nathanson, a director who has been talking about media opportunities since 1984. with dissolution.
“The general managers of telecommunications started looking outwards to give the grass a greener chance. The sex of them was and always will be the media, “Moffett said.” But the more sex the business has, the worse it is to be profitable. “
Steve Case, founder of AOL and one of the architects of the $ 164 billion merger with Time Warner, responded to AT & T’s media outburst by tweeting “#dejavu”.
Stankey, a veteran of telecommunications, was AT&T DirecTV, a satellite TV broadcaster and Time Warner acquisition agent. Within four months, a decade has dissolved its media deals, and shareholders have come at a high cost.
In February, AT&T sell DirecTV’s 30 percent stake was transferred to TPG, a privately held company, and a new company worth $ 16 billion. That was a quarter of the company’s $ 67 billion in value when it acquired the business six years ago. New Street Research analyst Jonathan Chaplin described the deal as a “humiliating transaction that is hardly classified as a divestment.”
This was followed by a spin-off and merger with WarnerMedia with Discovery in exchange for $ 43 billion in cash holdings and debt for the newly formed company, followed by a 70 percent stake in the expanded company.
John Stankey, a veteran of telecommunications, was AT&T DirecTV, a satellite TV broadcaster and Time Warner acquisition agent. In the space of four months, a decade has dissolved its media deals. © REUTERS
Randall Stephenson, former CEO of AT&T, tried to get his hands on Hollywood producers by buying Time Warner, getting an asset slipped from Rupert Murdoch’s fingers. © AFP via Getty Images
Combined, these deals destroyed more than $ 50 billion in shareholder value, according to FT estimates.
AT&T’s market capitalization since October 2016 has revealed that Time Warner’s deal has changed by nearly $ 230 billion. Disney, meanwhile, has doubled its value to $ 150 billion.
Stankey rose to become CEO of AT&T last year, taking over from Randall Stephenson, who tried to get his hands on Hollywood producers by acquiring Time Warner, securing an asset slipped from Rupert Murdoch’s fingers.
Jeff Bewkes, then CEO of Time Warner, decided to watch Netflix’s attack and sell the company to a deep-pocketed group that could cover the costs of its content in the future.
But the list was pretty short. Facebook and Google had no interest, Apple engaged in conversations but he did not interfere, according to information about the negotiations. Comcast has already bought a media company, as well as Verizon. That left AT&T.
Bewkes asked AT&T management if they had enough money to properly invest in a global streaming service, which would lead to losses over the years, according to a person informed in the discussions. The person added that he has never received a clear response from AT&T.
Perhaps it was a sign that the deal would extend to the AT&T limit. The deal turned AT&T into the world’s most indebted company, with a net debt of $ 180 billion, and it was already removing subscribers on DirecTV as it cut cables as it began in 2017.
AT&T media outlets also wore a “reconsidered” dividend. The reduction, which has not yet been quantified, will reduce a key attraction for the company’s shares: high dividend yields. Shares of the group fell 5.8 percent on Tuesday.
Verizon’s media experiment cost billions of dollars. The company spent $ 9 billion to buy and merge AOL and Yahoo, and presented Google and Facebook as opportunities to take on digital advertising.
Hans Vestberg, a former Ericsson chief who was developing Verizon’s 5G strategy, was appointed to the top job in 2018 and tried to stop the growing losses in the media business. Verizon valued the value of its media assets — properties like Tumblr, The Huffington Post, TechCrunch, and Yahoo Sports — at a value of nearly $ 5 billion, and after repeatedly trying to sell it, it eventually made $ 5 billion in sales to Apollo this month.
Verizon and AT&T spent nearly $ 70 billion between them C Acquiring the band spectrum to increase 5G coverage in February, the fantasy hockey leagues and the new Space Jam movies were offering another launch to examine whether they were the best use of their money.
Nick Read Vodafone CEO said “as a company we never believed that content, telecommunications and the media should have different business models.”
Vodafone, which makes Germany’s largest pay-TV business, has adopted the “aggregator” model, a neutral platform that connects it to the widest content that millions of customers can offer. “If you’re involved in content creation, you have to make a serious financial commitment,” Read said.
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