It is believed that the blockbuster deal of AT&T with Time Warner Inc will be a blessing for the investment bankers, lobbyists, and lawyers. Since the announcement of the 85.4 billion deal between AT&T and Time Warner Inc, AT&T CEO Randall Stephenson and Time Warner Inc CEO Jeffrey Bewkes were much talkative about the advantages of merging the second largest wireless phone provider of the nation with a leading entertainment firm that owns assets like CNN, HBO, Cartoon Network, Warner Bros film and TV studio, and TBS.
It is estimated by AT&T that they could achieve one billion dollars in cost savings in about three years after buying Time Warner. Stephenson also promised that this merger would transform the way people access media, as they will be able to add new advertising models and new subscriptions. Popular TV shows like “The Big Bang Theory” and Time Warner movies could be promoted to the customers of AT&T cell phone users.
Some analysts, however, still believe that this massive merger could pan out of the way, if the federal regulators disapprove the deal. There is good reason for skepticism as many mergers have failed to live up the hype. “Most of them don’t work out,” said Rita Gunther McGrath, a management professor at Columbia Business School. “And the success rates for the big ones are abysmal.”
The problems in the merger of AT&T and Time Warner include challenges in integrating the disparate business units, conflicts in their corporate cultures, and getting beaten by the rivals who respond fast to the fluctuations and changes in the market.
It was earlier see with the AOL-Time Warner merger for $103.5 billion, which became one of the biggest failed mergers in the history of telecommunications. The deal was announced with much hype in Jan 2000, and billed as the coming of age for internet, but AOL proved to be weak vehicle for the deal. “The whole thing was built on a house of cards,” McGrath said. “The timing was off, the deal came on the brink of when the stock market bubble was about to burst.”