With Judge Leon ruling in favor of letting the landmark AT&T/Time Warner $85 billion deal to go ahead as planned this afternoon despite DOJ anti-trust concerns, the impact from this decision will have wide reaching ramifications across the telecommunications, media, and tech industry for decades to come. For AT&T and Time Warner this is a “major victory lap” as having these combined media and entertainment assets under the hood of AT&T will significantly enhance streaming endeavors and cross pollination going forward with a major shot across the bow towards other cable and wireless players as this telecommunications and media behemoth is now hitting the ground running. In particular we would expect aggressive bundling of HBO, CNN, and other proprietary sports content (NBA, NCAA, MLB) from Time Warner into the AT&T network as a key incentive for current and new AT&T wireless customers. In particular, many on the Street and across the media industry are laser focused on today’s ruling to allow the mega deal as all indications are that a “green light” on the AT&T/Time Warner deal will result in Comcast going ahead with its ~$60 billion all cash bid for the 21st Century Fox assets likely tomorrow.
With the AT&T ruling to move the deal forward, Comcast and Roberts will likely throw their hat in the ring in its quest to battle Iger and Disney for these unique entertainment assets that will propel the eventual winner to become a major streaming player and content rich behemoth for years to come. We note that Iger and Disney are heavily betting on these Fox assets as evidenced by its $52 billion all stock bid, which will have to be transformed into a higher, all cash bid if Comcast moves forward with a formal offer later this week. Comcast has already confirmed it is preparing an all cash bid for 21st Century Fox’s entertainment assets and is the “advanced stages” of a premium offer to that of Disney’s $52 billion bid. This would be a “game changing” development as Disney and Iger were long thought to be the sole bidders for these assets after many months of speculation and worries around anti-trust issues could have initially deterred Comcast (e.g. AT&T/Time Warner case). We note Disney’s $52 billion bid is an all stock deal that is a transformational event for the future of the content and streaming landscape in our opinion and is integral to the streaming ambitions of Iger and Disney. This deal would put Disney in the catbirds seat in terms of content king and with its streaming service set to launch in 2019 Iger has a clear runway to gain market and mind share from the likes of Netflix. With Comcast already going after Sky assets in Europe, this would be a logical and “aggressive move” for Comcast to go after these golden entertainment assets of Fox and would move Comcast to the forefront of the streaming game potentially over the coming years in our opinion. There are clearly vast synergies around the box office/advertising by combining Fox’s movie and television studio businesses (Pixar, Marvel, 20th Century Fox, etc.) with Disney’s vast entertainment assets that would give the combined media behemoth 35%-40% of domestic box office market share, while we also estimate there are roughly $2 billion of cost synergies that could be realized in the first 12 to 18 months of the deal as Disney finds overlap on the studio front. Comcast’s bid would not have as much pure synergy in our opinion, however this would be a major and defining strategic win for the company and Roberts if they head in this direction. We will be watching this news closely tomorrow (Comcast bid likely) as Disney’s acquisition of Fox represents the epicenter of Disney’s streaming endeavors and Comcast entering the Fox sweepstakes would be a game of high stakes poker that could change the course of the media and streaming landscape for decades to come depending on which direction this deal heads. In a nutshell, if Comcast won these assets from the arms of Disney it would be a “devastating and hard to recover blow” to Iger and Disney’s streaming ambitions going forward.