Sunday, October 23, 2016

Ma Bell to Marry Pa Cable

Come up off your color chart
I know where you're coming from

It appears that AT&T is buying Time Warner Inc for about $85 billion in cash and stock. The deal would symbolize a long era of consolidation that began not long after AT&T was 'deregulated' and busted up in the 1980s.

Why all of the mergers? For one, cheap credit provides the ultimate consolidation currency. Moreover, there is market power to be had for incumbents seeking to protect their franchises from entrepreneurial entry in this heavily regulated (despite the 'deregulation' claim) sector.

I remember when AOL bought Time Warner for a hefty $182 billion in 2000. Does that mean that AT&T is getting a deal at 50% off? Hardly.

I do wonder whether this deal signifies a coming trend reversal in, for example telecom combos or cheap credit driven buyouts, as did AOL when it top ticked the dot com bubble by paying thru the nose for Time Warner.

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