AT&T’s Time Warner acquisition is the most discussed news in telecom industry these days, and experts believe that this acquisition could spell issues for the Dish Network. AT&T announced last month that they would acquire Time Warner Inc. in a stock and cash transaction for 107.50 dollars per share, which is a 36.0% premium. As per some reports, this transaction is valued at a total equity value of 108.7 billion dollars.
AT&T expects that the acquisition will be accretive on adjusted earnings per share (EPS) and free cash flow (FCF) per share in the initial year after the successful completion of the acquisition. It is reported that with the completion of the acquisition of Time Warner, AT&T will get access to the “premium content” of Time Warner, which could help AT&T with their DirecTV Now service.
From Time Warner’s point of view, the acquisition will enable them to deliver their content on varying platforms. Time Warner has offered AT&T their premium, and much popular content like HBO’s Game of Thrones.
It is noted that the pay-TV business of Dish Network is facing rising competition and pressure from companies like AT&T and Verizon Communications. After AT&T acquired DirecTV, they planned to start three OTT services, DirecTV Now, DirecTV Preview, and DirecTV Mobile, as they expect that their target market will expand in the medium term. DirecTV Now together with the Time Warner acquisition could pose much threat to Dish Network packages.
The proposed acquisition of Time Warner could result in online video services of Dish Network being throttled by the broad infrastructure of AT&T. This may also result in the combined company, made from AT&T and Time Warner merger, withholding programming rights from the Dish Network, leading to an increase in the programming costs.
In addition to that, if Time Warner and AT&T start to offer skinny bundles together at much lower prices than the Sling TV offering from Dish Network, it may result in an erosion of subscriber base from Dish to DirecTV and will drive up the subscriber acquisition costs for Dish.