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ATT Says Time-Warner Merger Is For Greater Mobile Innovation

by Richard Guppy | Oct 24, 2016

AT&T’s CEO Randall Stephenson has said that the deal to acquire Time-Warner for $84bn is driven by the need to innovate in mobile.  Owning media and TV giant Time-Warner will enable AT&T to introduce new mobile propositions with agility and without obstacle.  DirectTV Now already offers an example of AT&T’s mobile innovation, with 100 premium channels to be delivered over the top (OTT) to mobile devices.  As 5G develops, with higher connectivity speeds, so delivery of content to mobile devices will become even more relevant to competing in the industry.

Competitor Verizon’s strategy is more about its network and about delivering content and services from independent providers on that network, with advertising services on top.  The acquisitions of AOL, Fleetmatics and Yahoo among other IoT and ad acquisitions are testimony to Verizon’s strategy. 

Hence the US telecoms market is finally dividing into two main directions: content+connectivity (AT&T) and services+networks (Verizon).  Sprint and T-Mobile compete more at the connectivity level with plain old-fashioned mobile services (POMS, in place of the previous plain old-fashioned telephone services, POTS).

AT&T says that this deal is like nothing previously seen.  Yes and no. 

Yes: the merger of mobile and content is indeed new at this scale.

No: the US market is awash with earlier examples of mergers, acquisitions and sales of major companies across the carrier, content, broadcasting and equipment sectors, stretching back decades.  For one, cable TV giant Comcast acquired NBC Universal studio in 2011 for a total of $38bn.  For another, internet company AOL acquired Time-Warner studio for $164bn in 2000, selling it 9 years later to make what one media source reckons ‘tops the list of the most disastrous mergers ever carried out’.  AOL is now with Verizon, Time-Warner may be with AT&T.

Will the deal go through?  It seems possible, if the right compromises are made.  It's a case of convergence rather than concentration, and there are plenty of precedents for that.  Regulators are much more comfortable with convergence than concentration.

What will the impact be, beyond possible innovation?  AT&T’s CEO said it exactly, with words to the effect of: ‘if we make it successful, others will copy, and if we don’t, they won’t’.  If it does become a success story, other carriers around the world will be driven to consider similar mergers and similar kinds of innovation, to bring more content to mobile and in new ways.  That is the main take-away from this event.

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