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Mega Merger Set To Put Pressure On Foxtel & Stan, Netflix Shares Sink

Foxtel and Stan along with Netflix and Disney are facing new competition following the overnight announcement that US giant AT&T has agreed to spin off its media operations in a A$160-Billion-dollar deal with Discovery.

Insiders are claiming that this will create a major new entertainment company with assets that include CNN and HBO, HGTV and the Food Network.

ChannelNews understands that a new global streaming service is going to be rolled out in the future called HBO Max that Australians will be able to subscribe to.

The transaction values the combined entity at about A$160 billion including debt, based on WarnerMedia’s estimated enterprise value of more than $90 billion.

Both Stan and Foxtel have content relationships with the set to be merged Companies.

The plan, first reported by Bloomberg News, would combine Discovery’s reality-TV empire with AT&T’s vast media holdings, creating a formidable competitor to Netflix and Walt Disney.

Discovery Chief Executive Officer David Zaslav is to lead the new entity.

The future of WarnerMedia CEO Jason Kilar, meanwhile, has yet to be determined claims Bloomberg, AT&T CEO John Stankey said on a conference call discussing the deal.

The transaction includes all of AT&T’s WarnerMedia operations whose content is available on Foxtel.

In addition to CNN and HBO, WarnerMedia owns Cartoon Network, TBS, TNT, and the Warner Bros. studio. Discovery, backed by cable mogul John Malone, controls networks such as TLC and Animal Planet. The new company’s name will be announced this week, Zaslav said on the conference call.

“This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms,” Stankey said in the statement. “It will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies which can be reinvested in producing greater content to give consumers what they want.”

“I expect AT&T is going to be the No. 1 telecom and communications company in the world,” Zaslav said on the conference call. And the new combined entity “will not stop until we have the No. 1 global entertainment company, reaching people on every device.”

Though he has questioned in the past whether news content was a good fit with Discovery, Zaslav said the new company would keep CNN and “lean into news.”

The big US carrier has been boosting movie and television production to attract subscribers to its HBO Max streaming service Bloomberg said.

WarnerMedia, which was known as Warner Bros when it was acquired by AT&T through the purchase of Time Warner in 2018 for US$109 billion, includes CNN, HBO as well as cable channels TNT and TBS. Discovery focuses more on reality-focused TV channels, such as the Food Network and HGTV.

The deal also represents a change of course for AT&T, which had sought in recent years to integrate content production and distribution. It’s spin off of WarnerMedia effectively reverses those plans.

“This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms,” John Stankey, CEO of AT&T, said in a statement. “AT&T shareholders will retain their stake in our leading communications company that comes with an attractive dividend. Plus, they will get a stake in the new company, a global media leader that can build one of the top streaming platforms in the world.”

Shares of AT&T were up almost 5 percent in the premarket after the announcement. Discover stock was up about 15 percent.

 

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