Stating The Obvious: A Successful Time Warner Acquisition Will Be A Game Changer For AT&T

In a note released Tuesday, Tigress Financial Partners said the acquisition of Time Warner Inc TWX could be a game changer for AT&T Inc. T.

Analyst Ivan Feinseth believes the proposed acquisition of Time Warner, which has properties such as HBO, TNT, TBS and CNN along with the Warner Bros. film studio and sports telecast rights, would provide a significant portfolio of content. Time Warner also owns a 10 percent stake in Internet video service provider Hulu.

Tigress is of the view that the combined entity would be a formidable competitor to Comcast Corporation CMCSA, which bought NBC Universal in 2011. The firm also referred to Comcast's recent plans to entire the wireless service business, creating competition for AT&T.

End-Of-2017 Closure Likely

The firm noted the AT&T-Time Warner deal is now pending Department Of Justice approval, with the total impact of the combined entity and its competitiveness depending on what concessions or divestitures need to be made.

The firm feels the FCC won't have any say on the deal, as it doesn't involve the transfer of any FCC licenses. As such, if everything goes well, the firm expects the deal to close by the end of 2017.

According to the firm, the over-the-top online streaming service 'DirecTV now' AT&T launched in the third quarter of 2016, which allows customers access DirecTV content over a wired or wireless Internet connection using various connected devices, without the need for a satellite dish or any additional hardware, will be further enhanced by the addition of the Time Warner content.

Stock Fairly Valued At Current Levels

Commenting on AT&T, Feinseth said the business performance continues to be pressured by subscriber competition and spectrum demand, resulting in low levels of return on capital and economic profit. The firm believes wireless spectrum continued to constrain the telecom industry as a whole, including AT&T, which continues to invest in expanding spectrum and 5G service upgrades to meet future capacity demands.

Longer term, Tigress believes the company can turn a corner due to the several key initiatives the company has undertaken, including the proposed Time Warner purchase.

"Based on the current level of business performance, we see few drivers to create near-term shareholder value creation and view the stock as fairly valued at current levels," the firm concluded.

Tigress upgraded its rating on AT&T from Underperform to Neutral.

Related Links:

Lifting Of FCC's Spectrum Quiet Period Will Be A Catalyst For Further M&A

FCC Announces April 'Infrastructure Month' - These Companies Stand To Benefit