For AT&T, Time Warner was always on the menu
By Liana B. Baker
NEW YORK (Reuters) - When Time Warner Inc's TWX.N Jeff Bewkes welcomed AT&T Inc's (T.N: Quote) Randall Stephenson for lunch at Time Warner Center in New York in late August, their meeting was supposed to be one of the catch-ups the two chief executives have had over the years.
And it certainly started that way, with the two men chatting about the direction of the media, broadband and mobile telecommunications industries, according to accounts given by Stephenson and Bewkes as well as people familiar with the discussions who spoke on condition of anonymity.
Stephenson and Bewkes discussed how Time Warner could reach more customers through AT&T's mobile network, and how that content could reinforce the loyalty of customers. Some of this could be achieved through closer ties and partnerships.
But then Stephenson showed his hand. He proposed an outright merger of the two companies, the biggest shakeup in the U.S. media landscape since U.S. telecommunications giant Comcast Corp's (CMCSA.O: Quote) takeover of media conglomerate NBC Universal in 2011.
"The more we talked about it, the more it fell into place, that there would be benefits that might be significant and might allow us to evolve the ecosystem faster," Bewkes told reporters on a conference call on Saturday.
Comcast's deal had greatly influenced Stephenson's thinking, spurring him to look for media and video acquisitions now that AT&T had the most video subscribers in the U.S. with 25 million. The media companies he first looked at buying, such as Starz STRZA.O, which later merged with Lions Gate Entertainment Corp LGF.N, and Scripps Network Interactive Inc SNI.O, were too small for his liking.
Stephenson's problem was that the big media companies he deemed attractive were not easy targets. CBS Corp CBS.N and Viacom (VIAB.O: Quote) were family controlled, while Walt Disney Co (DIS.N: Quote), with a $150 billion market capitalization, was too big.
When Twenty-First Century Fox Inc (FOXA.O: Quote) made a hostile acquisition approach to Time Warner in 2014, AT&T was awaiting regulatory approval on its deal to buy DirecTV, and couldn't pursue another large deal at the same time. Continued...