High Fliers And Large Parachutes

Michael Hedges June 19, 2018 Follow on Twitter

Telecoms know one thing better than everybody else: billing. These giants of telecommunications, once known colloquially as telephone companies, have perfected this skill over generations. Of course, services provided have adapted to evolving customer interests. Wires are out. Clouds are in. Billing never changes. This has made telecoms masters of the universe.

Giant US telecom AT&T finalized last week its acquisition of very big broadcaster and film producer Time Warner. About a year and a half ago AT&T and Time Warner agreed to the deal, AT&T paying US$84.5 billion plus another US$20 billion or so to pay off the Time Warner debt. The US Justice Department tried to stop it citing anti-trust concerns, with some critics suggesting a political undertone. The judge hearing the arguments said it was all cool. Time Warner is now known as WarnerMedia (no space) to avoid confusion with separately owned Time Warner Cable.

“We’re going to bring a fresh approach to how the media and entertainment industry works for consumers, content creators, distributors and advertisers,” said AT&T Chairman and chief executive Randall Stephenson in a statement to staff, quoted by Variety (June 14). “You have my word that you will continue to have the creative freedom and resources to keep doing what you do best.” As expected, Time Warner chief executive Jeff Bewkes is out, replaced by AT&T Entertainment head John Stankey.

Sending his own, more detailed, memo to the Time Warner staff, Mr. Stankey mentioned how they are now “eligible for robust employee discounts on our products and services.” He also mentioned that Turner Broadcasting chief executive John Martin “will no longer be with the company.” Other executives will also exit. Turner Broadcasting, HBO and Warner Studios will remain the chief subsidiaries of the new WarnerMedia. Expectations within the ranks are that Mr. Stankey will be far more hand-on than Mr. Bewkes, in that phone company thinking way.

With the closing of the AT&T Time Warner deal, all attention, at least from financial wags, has turned to more very big mergers and acquisitions related to media companies. Telecoms, so say the sages, covet content suppliers to bulk-up services to compete with customer-grabbing Netflix and Amazon Prime. At the top of the list is 21st Century Fox (21CFox), the Murdoch family ready to exit entertainment and international assets and consolidating around publishing, sports and the Fox family of TV channels.

US telecom Comcast was the first to jump, raising its bid for the 21CFox entertainment assets to US$65 billion plus about US$20 billion for existing 21CFox debt. Separately, Comcast has bid to take over European pay-TV company Sky plc, 39% owned by 21CFox. Comcast is also in the broadcasting and entertainment businesses with the NBCUniversal unit. The 21CFox board, meaning the Murdoch family and institutional investors, will meet this week (June 20) to “discuss” the Comcast bid, reported business channel CNBC (June 19). The tender refrains of “We’re in the money” will be heard in the board room.

There is, of course, a bidding war for the 21CFox assets. The Walt Disney Company offered US$52.4 billion for the same 21CFox assets at the end of 2017 and, like Comcast subsequently, made a separate bid for Sky plc. The big difference, meaningful to all, is the Comcast bid is all cash, Disney offering stock.

The Murdoch family is clearly moving on to green, the color of money, pastures. In the midst of the clamoring and clucking of investment bankers, due to make about a half billion financing any of it, oldest son Lachlan Murdoch was named 21CFox chairman and chief executive. Less all the departing assets it will be renamed “New Fox,” reported Bloomberg (June 14). It is widely expected that New Fox will be remerged, eventually, with News Corporation, owner of various newspapers, their respective websites and the Dow Jones business news agency. James Murdoch will be leaving the building.

That’s not all, folks. Disney chairman Bob Iger is likely to add cash to the 21CFox bid, reported theFinancial Times, Bloomberg and others (June 18), just in time for that board meeting. It will be a decision maker; after which the bidder holding the short straw will have five days to come up with more money.

See also in ftm Hot Topics

• Media Mergers and Acquisitions

• Time Warner/CNN

• News Corporation/21st Century Fox/Rupert Murdoch

• Walt Disney Company