AT&T Stock Rises Amid Positive Signs For WarnerMedia-Discovery Deal Review, Strong Streaming And Wireless Growth – Update

Discovery WarnerMedia
Discovery WarnerMedia

UPDATED with closing price. AT&T’s beaten-down stock rose more than 2% today to reach a three-month high on strong subscriber numbers and auspicious signs for the pending WarnerMedia-Discovery deal.

The $43 billion combination of WarnerMedia and Discovery in a spinoff from AT&T less than three years after the $85.4 billion deal for Time Warner, is likely to close in April, CNBC reported. The network’s David Faber, citing sources close to the process, said the transaction “is only a couple, let’s call it three months away from completion.”

At one point in the trading session, AT&T shares were up more than 4%, a rare burst for the range-bound stock. After some downbeat news from the Federal Reserve Bank, overall stocks slid in the second half of the trading day and AT&T closed at $26.21. Along with Discovery shares, it has lost ground since the deal was first announced, so the upward movement in the early days of 2022 has been a change of pace.

AT&T and Discovery have consistently estimated a mid-year close. “Could it accelerate and happen earlier? It’s entirely possible,” AT&T CEO John Stankey said during an appearance at a Citibank investor conference. “It could also possibly slip. Right now, the momentum is we’re doing exactly what we expected to have occurred is occurring.”

Along with the positive vibes surrounding the spinoff, AT&T also reported a handful of strong 2021 metrics, including subscriber numbers for HBO and HBO Max and its wireless business. HBO and HBO Max closed 2021 with 73.8 million global subscribers, beating internal forecasts. The company will report full results along with quarterly financials later this quarter.

The Warner-Discovery merger has cleared several hurdles, recently gaining the approval of the European Union. Discovery shareholders will soon weigh in on the transaction. Stankey said the process in the U.S., including with antitrust regulators at the Department of Justice, has been smooth. DOJ officials appointed by former president Donald Trump famously filed suit to block the $85.4 billion AT&T-Time Warner deal. A federal judge sided against the DOJ, with an appellate court upholding the ruling in early 2019.

Talks with the DOJ and other officials are “following kind of the script and the expectations,” Stankey said. AT&T management is “comfortable with how that’s going. Conversations have been constructive and they’ve been responsive both ways. I see nothing going on with that that gives me any cause for concern.”

The structure and timeline of the transaction, he added, are following what was outlined last May. The telecom giant also spun off DirecTV into a new entity part-owned by private equity firm TPG. The Time Warner and DirecTV deals cost shareholders tens of billions in losses. Like rival Verizon, AT&T plans to focus on its traditional telecom core once the WarnerMedia deal closes, something many shareholders have agitated for over recent years.

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