What's going on?
On Tuesday, US regulators approved telecoms company AT&T’s purchase of media giant Time Warner for $85 billion – almost two years after the deal was first announced. It helped Time’s shares to travel up 4% on Wednesday.
What does this mean?
Regulators were worried that AT&T’s position as a major cell phone service carrier and satellite television provider – coupled with owning Time’s media library including Game of Thrones – would give it too much power to push out smaller media companies and charge customers unfairly high prices.
But AT&T convinced them that the deal wouldn’t make it more powerful in its existing markets because it’s actually making a sideways step into content production, where it’ll compete with a new set of content creators – including Netflix.
Why should I care?
For markets: Stocks of other M&A candidates rose on Wednesday.
Investors bought stocks of other telecoms and media companies currently in the throes of acquisition discussions – probably believing regulators are likely to approve big deals. Shares of T-Mobile US and Sprint rose by 2% – they’re waiting to hear whether their deal will be allowed to proceed. And broadcaster CBS’s stock rose by 3%, perhaps because one obstacle to its potential merger with Viacom appears more surmountable.
For you personally: AT&T customers might face higher prices in the future.
AT&T has lost subscribers recently, with many going to rival T-Mobile US – even if it isn’t always cheaper. T-Mobile US is able to entice customers to its network by bundling in cable or streaming TV packages. While the overall price is higher, users may feel they’re getting good value for money. With Time Warner’s armory of brands like HBO and Warner Bros, AT&T will soon be able hook its customers into a bigger, and potentially more expensive, deal.