Over the last decade, AT&T Inc. has gone from a regional telephone provider to become a national telecommunications company. Their next big expansion plan is to buy businesses to transform into a media and entertainment giant, at least as per the opinion of people who are familiar with their plans.
Experts say that AT&T will seek deals to make themselves a producer of programming, thereby shifting their business model. It is rumored that the target of AT&T includes companies that are worth two billion dollars to fifty billion dollars.
As wireless growth flattens, phone services providers are trying to find new expansion steps and competition from the cable providers are still intense. AT&T’s main rival Verizon Communications Inc., is focusing on mobile advertising, where AT&T has its focus on video programming.
With their DirecTV deal, AT&T has become the largest pay TV provider in the US and they are now faced with a new set of challenges. Trying to hold their TV subscribers in the era of cord cutting, and fighting against the attempts of cable networks to increase prices for their channels, are two big challenges for AT&T.
However, adding media capabilities to the distribution business of AT&T will offer them good insight into the viewing habits of the subscribers, just like their rival Comcast Corp. got in acquisition of NBCUniversal in 2011.
“The landscape has changed so much in the past 10 years. Strategically, going into media makes a lot of sense,” said Amy Yong, an analyst with Macquarie Capital USA Inc. “Owning content has become very important, not only for cost benefits but getting a stronger foothold among consumers.”
It is reported that AT&T CEO Randall Stephenson keeps a list of about 40-45 companies, which is a collection the potential takeover targets and peers. AT&T has made serious bid for Starz, the premium TV network that agreed to a $4.4 billion takeover by Lions Gate Entertainment Corp. in June. AT&T also considered taking over Paramount Pictures that is owned by Viacom Inc., before deciding against the bid.
AT&T understands that the move into entertainment will not be an easy one, but experts believe that the Telco giant knows its way with the acquisitions.