The word is official: Time Warner Inc (NYSE:TWX) stockholders have approved the merger with AT&T Inc. (NYSE:T). Thus, in a matter of two years, AT&T stock has gone from moribund telecom play with a great dividend to a media powerhouse with a great dividend.
After first buying up DirecTV, and then grabbing for TWX, AT&T stock has clearly announced that it is no longer for widows and orphans.
How T Stock Is Boosted by TWX
The moves signal to investors that T stock is now about looking to the future, when communications and content are what will matter. It’s a bit dicey for AT&T stock, in that being a distributor of content via its DirecTV and U-verse products can be very lucrative. The problem is that DirecTV’s growth has been flagging.
With Time Warner’s cable assets bundled with its own cable and satellite offerings, and all the technology associated with telecom and communications in general, T stock now has the power to essentially deliver anything and everything to anywhere and everywhere.
The TWX purchase also gives it a content production house. Warner Bros. Studios has always been one of the most successful studios in Hollywood. It also owns the DC Comics franchises, which includes Batman and Superman. With Geoff Johns now in charge of moving the DC properties forward, it puts Time Warner on track to maximizing the potential of its comic book properties.
(Little-known fact: Johns and Walt Disney Co’s (NYSE:DIS) Marvel chief Kevin Feige worked together for many years prior to their current stints. They are cut from the same very successful cloth).
Of course, Time Warner also owns Home Box Office. While there is talk of spinning HBO off, for the time being, it remains the premier original programming source. It guarantees that Netflix, Inc. (NASDAQ:NFLX) will have to keep chasing HBO’s brand. Thus, AT&T become an effective competitor to NFLX. The desire for original branded content, especially quality content, is only going to increase.
With the TWX purchase, AT&T stock moves from moribund slacker to Peter Lynch stalwart. It boosts T stock’s free cash flow from about $16 billion to about $20 billion, and there will likely be saving and synergies from the cable businesses overlapping.