Why AT&T Acquiring Time Warner Makes Perfect Sense
AT&T may be looking to transform into an advertising and media company. Word is the company is looking at acquiring Time Warner Cable. With Comcast and Verizon already owning cable pipelines, is it too late for AT&T?
Time Warner Cable For AT&T
Trends in telecommunications are seeing major companies turn to media companies to stay relevant and competitive. Verizon purchased AOL in May, giving the company an in into advertising. Then Verizon added Yahoo in July – instantly adding 1 billion active users into the mix. Comcast owns NBC Universal, and recently purchased Dreamworks Animation in August. Telecommunications companies are branching into media. And AT&T needs to keep up.
AT&T knows this, having already acquired DirecTV in 2015. Between AT&T and DirecTV data, the company is a goldmine of consumer data. AT&T already knows where their customers are, what they’re watching, and even what they’re purchasing.
So how does AT&T utilize this data?
By buying a media company. AT&T already has the targeting information for consumers, but not the platform to show them ads. Buying a media company is a brilliant advertising play because it gives them an instant user base and content to advertise against. And with $7.2 billion in cash (according to Q2 earnings), AT&T has the means to make it happen. Time Warner failed to merge with FOX in 2014, and could be the perfect partner for AT&T.
However, there are possible hesitations. Up front, financial benefits aren’t particularly obvious. Without stand-alone financial reasons, a deal might need justification on competitive grounds as well as “opportunity costs and revenue synergies with benefits unlikely to accrue immediately.”
But if AT&T controlled the media content and technology to place ads, it could help the company deliver cross-screen advertising placements. Advertisers could target viewers anytime anywhere on phones, TV, or web browsers, making the deal quite appealing to AT&T.
The idea makes too much sense not to happen. And based on Time Warner’s desire to strike a deal with FOX two years ago, look for this “rumor” to become reality sooner rather than later.
Watch AT&T announces the merging here!
And when it does, look for AT&T (T) shares to rise.
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