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AT&T: WarnerMedia, Discovery Merger Expected to Close in Q2

Scuttlebutt about a possible first-quarter (ending March 31) close of AT&T’s $43 billion WarnerMedia minority stake asset sale to Discovery ended Jan. 26 after the telecom announced it expects the deal to be finalized in the second quarter (ending June 30). After consummation of the deal, AT&T will own 71% of the new Warner Bros. Discovery company, while Discovery will assume operational control.

AT&T CEO John Stankey, speaking on the fiscal call, said confidence regarding a Q2 closing is due to feedback from regulatory bodies domestically and abroad.

“We’ve had several milestones in the past couple weeks, including passage in the [European Union] and filing process with the SEC,” Stankey said. “You look at where we are with national regulatory domains, and our exchange with regulators, and all of that is going right to pattern as expected. We don’t see anything that causes us concern.”

AT&T is anticipating a $8 billion to $9 billion shareholder dividend following close of the transaction.

WarnerMedia assets include Warner Bros. Pictures, HBO and Turner. AT&T said the media company generated fourth quarter revenue of $9.9 billion, up 15.4% versus revenue of $8.58 billion in the year-ago quarter, driven by higher content and other revenue, including the partial recovery from prior-year impacts of the pandemic and higher subscription revenue, partially offset by lower advertising revenue.

Operating income in the quarter plummeted almost 38% to $1.6 billion from $2.58 billion in the previous-year period. Income dropped due to continued HBO Max investments and incremental advertising revenue sharing costs were partially offset by higher revenues and cost savings initiatives.

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As previously reported earlier this month, there were 73.8 million combined global HBO Max and HBO subscribers at the end of 2021, up 13.1 million year-over-year and up 4.3 million sequentially, driven by international as well as domestic retail subscriber gains. At the end of the quarter, there were 46.8 million domestic Max and HBO subs versus 41.5 million in the year-ago quarter, up 5.3 million year-over-year.

“A year and a half ago, we began simplifying our business to reposition AT&T for growth and we’re extremely pleased with how we’ve executed on that commitment,” Stankey said in a statement. “We ended 2021 the way we started it — by growing our customer relationships, running our operations more effectively and efficiently, and sharpening our focus. Our momentum is strong and we’re confident there is more opportunity to continue to grow our customer base and drive costs from the business.”

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