Tuesday
Mar062018

How Will AT&T/Time Warner Play in Asia and Africa?

Will the acquisition, if approved, focus AT&T on global competition?

The proposed AT&T/Time Warner merger has triggered a lot of debate, especially in the United States.  Will its approval help or hurt competition?  More fundamentally, will the merger be approved or blocked by the U.S. Justice Department, which has taken the case to court?  (Full Disclosure:  Kalba International has worked for AT&T, Time Warner and the Justice Department, though not at the same time nor recently.)  Yet few have focused on the worldwide implications of a combined AT&T-Time Warner.  How will the merger affect international competition?

America’s telecom operators were very active internationally after the original breakup of AT&T, when the seven “Baby Bells” plus GTE scoured the globe for acquisition and investment opportunities.  Soon they were active in some 50 countries as mobile operators, fixed network players, and “smart building” managers—from Argentina to China, Denmark to New Zealand.  This all ended in the late 1990s as the Bells scurried home to defend their turf after enactment of a new U.S. telecom law allowing competition in the local loop.  Since then their presence internationally has been replaced by OTTs like Google, Facebook and Netflix.

So, will things come full circle?  AT&T is already a local operator in Mexico and is present in other parts of Latin America, notably Brazil.  Is this just the first-stage of a wider international foray that would be fueled by the acquisition of Time Warner?  Or does the Time Warner move signal a reversion to domestic priorities in the face of competition from Netflix and other cord-cutting options?  The fact that AT&T is planning an IPO for its Latin American satellite TV unit (excluding its operations in Mexico, where Randall Stephenson, AT&T’s CEO—pictured above— worked as a young executive), suggests its international aspirations may be limited.

Yet if AT&T succeeds in acquiring Time Warner (TW), it would have a bigger and more diversified international revenue base, representing close to 30% of its total.  AT&T’s current international revenues are a much smaller share of its larger total revenues (only 6%) than are TW’s and are heavily concentrated in Latin America, where TW derives less than 20% of its international revenues.   By acquiring Time Warner, AT&T would double its international revenues to about $16 billion and widen them in geographic terms.  This could spark AT&T moves into mobile video delivery beyond the Americas (e.g. as MVNO) and other forms of video-on-demand.

Google, Facebook and Netflix, meanwhile, are increasingly targeting international markets.  Netflix, for example, is pursuing a concurrent 100-country dramatic rollout surge.  So are we heading for AT&T’s re-emergence as an international player?  The combined international revenues of an AT&T-TW would be about five times those of Netflix.  Still the question remains—could a hefty AT&T-Time Warner challenge a rapidly growing Netflix while also contending with the larger global OTTs and their Chinese look a-likes as well as Comcast, Disney and other media companies refocusing on international markets.

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