2 Big Mergers and a Smaller One

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

2 Big Mergers and a Smaller One

In 2000, AOL bought Time Warner for $164 Billion, an outrageous amount of money fueled by the dot com bubble. It was the worst merger in history. AOL was spun off in 2009 and was acquired by Verizon in 2015 for $4.4 Billion. Now, AT&T is looking to buy Time Warner for $85 Billion ($109B with debt included).

Both VZW and AT&T are experiencing a saturated cell phone market. AT&T lost a record 268,000 postpaid wireless subscribers last quarter. The DirecTV arm is replacing the U-Verse TV service but "While DirecTV added 323,000 video subscribers on the quarter, AT&T reports that the company lost 326,000 TV subscribers during that same period," according to DSLR. "AT&T's fixed-line broadband growth was unimpressive as well. While AT&T added 156,000 U-Verse broadband subscribers, it lost 161,000 DSL customers, for a net loss of 5,000 broadband subscribers on the quarter."

When you look at ARPU for video, in December 2014 it was $102.66 rising to $118.09 in 3Q16. IP Broadband ARPU (DSL) in the same period went from $44 to almost $50. You can only raise prices so far to increase revenue. You need more subscribers, but that is clearly NOT happening. So you go wider and buy another vertical. It is funny to watch Ma Bell follow cable's lead. A long time ago, AT&T owned cable under the AT&T Broadband brand. Now, it is playing catch up to VZ and Comcast.

TW owns movie studios, DC Comics, The CW TV Channel, HBO, TBS, CNN, a publishing house and 10% stake in Hulu. It will make AT&T on par with Comcast which owns NBCU.

This administration just doesn't know how to say NO to mergers (one notable exception was TWC-Comcast). There have been too many, leaving consumers with less choice -- and corporations with too much power and size (and debt). [If this deal goes through, AT&T will have about $175 billion in debt -- more than many banks!

A quieter but big merger: Phone maker VTECH is buying SNOM! In a move similar to Mitel buying Polycom (which a PE firm saved from happening), VTECH decided to scoop up German IP Phone maker, snom. All about Scale, right? Bigger is better. Just ask Mitel after buying Aastra.

And the third acquisition was assets only. "Endstream has completed the acquisition of the assets of Mainstream Communications, a provider of wholesale voice termination," reports Channel Vision magazine.

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