AT&T has announced plans to merge WarnerMedia and Discovery in a move that could create one of the largest streaming companies in the world. The telecom giant is hoping that the merger will pave the way for it to start a competition with major streaming platforms such as Netflix and Disney.
AT&T acquired Time Warner and all its assets for a reported $85 billion and is looking to make good use of all the assets it got as part of this deal. WarnerMedia includes several top entertainment brands including CNN, HBO, TNT, and others. The deal with Discovery will see AT&T receive up to $43 billion in cash and debt securities.
In addition to this, AT&T shareholders are expected to get up to 71% of shares in the new company while the rest will go to Discovery shareholders. So far, the merger has already been approved by the boards of these two companies but there aren’t too many details about any progress so far.
There is a confidence that the new merger will indeed be a huge success. SEC filings filed by AT&T show that the telecom giant is anticipating the new company will reach revenues of up to $52 billion by 2023.
However, the company also notes that the merger deal could create at least $3 billion in unexpected “cost synergies”, something that often means job cuts are indeed on the way. But the merger already has the blessing of both companies and is expected to happen sooner rather than later. We do not expect a huge management restructuring with the new company.
At the moment, David Zaslav, who is the President and CEO of Discovery, is expected to lead the new company once the merger is finalized. AT&T believes that the merger will make it easier for the new company to invest in new original content while also taking advantage of the massive library of shows and movies under its name.
Over the last few months or so, AT&T has made it clear that it wants to expand HBO Max into international markets. Merging with Discovery, a media company that has a massive global reach, could be a huge boost towards that goal.
Besides, HBO Max has also seen commendable growth over the last year or so. For example, in the first quarter of 2021, the streaming platform gained 3 million new subscribers. As of today, HBO Max has a total of 9.7 million customers and with plans to expand its availability in Latin America, that figure is set to increase substantially.
But it’s still way behind the big giants of the industry like Netflix. For example, both HBO Max and the HBO network have a global subscriber base of about 64 million people. This is way less compared to Netflix which has since reached over 206 million global subscribers. But the merger with Discovery will of course open new doors for growth.