39% Annualized Return And AT&T
Chris DeMuth Jr. • 175 Comments
Chris DeMuth Jr. • 175 Comments
Mon, Nov. 7, 8:07 PM
- The synergies from AT&T's (T +0.9%) $85B deal for Time Warner (TWX +1.5%) could be that much sweeter due to an accounting change coming to revenue recognition in 2018 (and using lessons AT&T learned in the DirecTV deal).
- The new standard affects recognizing revenues from customer contracts, creating issues for companies that feature factors like tiered pricing, volume discounts and other marketing offers, and contract modifications along with other contract terms.
- AT&T and Time Warner expect synergies of $1B within three years of closing. But aside from how the new standards affect stand-alone AT&T (such as allocating and timing of revenues between services and handsets), Time Warner sports a programming licensing backlog of $6.9B.
- That's future revenue not yet recognized, and under the new standard licenses could be treated as transferable rights, MarketWatch notes. And that could give AT&T closer control over measurement of deferred taxes and income taxes (along with a positive effect on shareholder equity).
Mon, Nov. 7, 10:41 AM
- Time Warner (NYSE:TWX) is up 1.2% today as Credit Suisse -- seeing a good chance for approval of AT&T's (T +0.9%) $85B buyout of the entertainment giant -- upgrades it to Outperform.
- That's up from a Neutral stance, and analyst Omark Sheikh has reiterated a $107.50 price target, implying 23% upside from today's pricing.
- Pessimism about the deal's chances is "overdone," Sheikh says, as it's a vertical transaction. And blocking it on public interest grounds (usually the bailiwick of the FCC) is "very difficult to justify."
- Even if the deal doesn't get an OK, downside is limited for Time Warner, he says: Fundamentals are good and it wouldn't preclude other suitors from getting involved.
- Previous AT&T/Time Warner coverage
Fri, Nov. 4, 2:29 PM
- DirecTV (NYSE:T) field services employees in the Southeast have voted to ratify a labor deal between AT&T and the Communications Workers of America.
- That deal covers about 1,050 employees. As with previous such ratifications (last week in the Midwest and Southwest), the deal puts the employees into an existing AT&T contract.
Thu, Nov. 3, 10:37 AM
- October monthly performance was: -2.87%
- 52-week performance vs. the S&P 500 is: +5%
- $0.18 in dividends were paid in October
- Top 10 Holdings as of 9/30/2016: AT&T Inc (T): 5.35027%, Exxon Mobil Corp (XOM): 5.13076%, Verizon Communications Inc (VZ): 4.13129%, Chevron Corp (CVX): 3.71538%, General Electric Co (GE): 3.29251%, Procter & Gamble Co (PG): 3.2247%, Wal-Mart Stores Inc (WMT): 2.95756%, Pfizer Inc (PFE): 2.82962%, Philip Morris International Inc (PM): 2.75804%, Kinder Morgan Inc P (KMI): 2.44856%
Thu, Nov. 3, 8:48 AM
- October monthly performance was: -0.58%
- 52-week performance vs. the S&P 500 is: +12%
- No dividends were paid in October
- Top 10 Holdings as of 6/30/2016: General Mills Inc (GIS): 3.56363%, AT&T Inc (T): 3.10141%, Coca-Cola Co (KO): 2.92358%, Campbell Soup Co (CPB): 2.52377%, Exelon Corp (EXC): 2.36382%, Suncor Energy Inc (SU): 2.32307%, The Hartford Financial Services Group Inc (HIG): 2.28103%, PPL Corp (PPL): 2.13051%, The Kraft Heinz Co (KHC): 2.07219%, Heineken NV (OTCQX:HINKF): 1.90962%
Thu, Nov. 3, 7:52 AM
- October monthly performance was: -0.83%
- 52-week performance vs. the S&P 500 is: 0%
- No dividends were paid in October
- Top 10 Holdings as of 9/30/2016: Apple Inc (AAPL): 6.67009%, Microsoft Corp (MSFT): 4.87637%, Exxon Mobil Corp (XOM): 3.94908%, General Electric Co (GE): 2.95355%, AT&T Inc (T): 2.72255%, Procter & Gamble Co (PG): 2.62116%, Amazon.com Inc (AMZN): 2.34306%, Verizon Communications Inc (VZ): 2.29657%, Wells Fargo & Co (WFC): 2.18848%, Facebook Inc A (FB): 2.12836%
Wed, Nov. 2, 12:45 PM
- In an extraordinary move, the Justice Dept. is suing AT&T (T -0.3%), charging that its DirecTV unit led a campaign to illegally block carriage of the Los Angeles Dodgers' TV channel.
- In the suit, the DOJ says DirecTV led an effort with then-separate AT&T, and Cox Communications and Charter Communications (CHTR +0.6%), to refuse carriage of Dodgers-owned SportsNet LA, sharing nonpublic information to do so -- all to gain bargaining power with Time Warner Cable (itself now part of Charter).
- DirecTV and Cox have balked at the cost of carrying the channel, and its struggles have been well documented as Southern Californians labored to find how to watch the Dodgers on television.
- AT&T, of course, will need DOJ approval to move forward with an $85B deal to buy out Time Warner (TWX -0.8%).
- SportsNet LA coverage
- Updated: AT&T responds. “We respect the DOJ’s important role in protecting consumers, but in this case, which occurred before AT&T’s acquisition of DirecTV, we see the facts differently," says General Counsel David McAtee in a statement. "The reason why no other major TV provider chose to carry this content was that no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to L.A. Dodgers baseball. We make our carriage decisions independently, legally and only after thorough negotiations with the content owner. We look forward to presenting these facts in court.”
Wed, Nov. 2, 3:20 AM
- AT&T's (NYSE:T) practice of exempting its streaming video services from data-usage caps is rankling competitors and shaping up as a major issue for authorities set to weigh the telecom giant's proposed acquisition of Time Warner (NYSE:TWX).
- According to WSJ, streaming services, media companies and TV networks are likely to press regulators to scrutinize the practice - known as "zero rating" - in their review of AT&T's $85.4B deal.
Tue, Nov. 1, 12:20 PM
- The battle for the live-TV streaming audience is heating up as Hulu signs deals with Fox (FOX -1.1%, FOXA -0.6%) and Disney (DIS -0.4%) to incorporate dozens of networks into its upcoming service.
- Fox and Disney are part of the co-ownership group at Hulu, of course, along with NBCUniversal (CMCSA -0.6%) and Time Warner (TWX -0.7%). The new deals mean that Hulu's service will include Disney's nets (particularly including ESPN live and on demand, as well as others in the Disney/ABC group) and Fox's entertainment, news, sports and nonfiction services.
- While early streaming-TV efforts (from Sling TV (DISH -1%) and Sony (SNE -2.2%)) looked more like "skinny bundling," lately the bundles are looking fatter. Hulu's adding dozens of networks, and AT&T's (T -0.7%) DirecTV Now (launching this month) is promising more than 100 channels for $35/month.
Mon, Oct. 31, 7:30 PM
- Time Warner (TWX +1.7%) got a lift today, boosted by an upgrade at FBR to Outperform on prospects for a path to avoid FCC review of the company's deal to be bought out by AT&T (NYSE:T).
- Analyst Barton Crockett raised his target price to $104 from $97, implying near-17% upside from today's close of $88.99.
- A small FCC license issue (a small station in Georgia, and uplink facilities for CNN) means the agency would have a hand in the review, but since Time Warner has already described those licenses as "immaterial," Crockett notes it could just give them up.
- And avoiding FCC review "vastly improves prospects for approval," he says. "The FCC has a public interest standard and a loose timeline that can be politicized and make merger approval tough. While the DOJ will review this merger, it moves more quickly and acts based on antitrust law, and so is less politicized than the FCC."
- It also helps politically that Netflix's Reed Hastings has been supportive of the deal, he notes.
Mon, Oct. 31, 6:46 PM
- Adding to the list of labor deals AT&T (NYSE:T) is closing on, the CWA says former field services employees of DirecTV have voted to ratify two agreements.
- The deals cover about 200 Midwest employees and 900 Southwest employees, bringing them up to date on existing contracts.
- Those employees joined AT&T as part of the July 2015 acquisition.
- Previously: CWA workers ratify AT&T deal, 16th in two years (Oct. 31 2016)
Mon, Oct. 31, 12:07 PM
- Employees of AT&T Internet Services (T +0.5%) have voted to ratify a three-year deal with the Communications Workers of America.
- That deal covers almost 1,200 employees in 16 states.
- It's the 19th deal (and 16th ratification) that the company has reached with the CWA and the International Brotherhood of Electrical Workers in the past two years. Those have collectively covered more than 95,000 employees.
Mon, Oct. 31, 3:29 AM
- Upset at being sidelined for advising on the deal, Goldman (NYSE:GS) is trying to persuade Apple (NASDAQ:AAPL) to make a rival bid for Time Warner (NYSE:TWX), according to the NY Post, which cited a source as saying the bank is "freaking out - trying to convince Apple to come in."
- On an earnings call on Wednesday, CEO Tim Cook said, "We are open to acquisitions of any size... I would confirm that television has intense interest with me and many other people here."
Fri, Oct. 28, 7:06 PM
- To finance its $85B deal for Time Warner (NYSE:TWX) -- half of which is coming in cash -- AT&T's (NYSE:T) invited its "relationship banks" to join a $40B bridge loan, at around three ticket levels, Bloomberg reports.
- Based on ratings of Baa1/BBB+ (and AT&T's ratings are on negative watch at the credit rating firms), the loan pricing may open at L+112.5 basis points, with a 10 bp commitment fee, and upfront fees of 20-30 bps.
- The company has BofA Merrill Lynch (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) on board to help finance the deal, though a $30B bond to help fund the deal won't be rushed as doubts remain about whether it will be completed.
- There's no reason to finance early given that ambiguity, a senior banker says. CreditSight analysts: "The merger may ultimately not be approved ... we feel the odds are around 50/50 at this stage."
- Some three-quarters of the financing is expected to take place in the investment-grade market. And doing the deal now rather than waiting for more regulatory certainty could end up more expensive for AT&T.
Fri, Oct. 28, 6:44 PM
- With the help of a very big deal -- AT&T's (NYSE:T) $85B offer for Time Warner (TWX -0.9%) -- companies have set a monthly record for merger and acquisition activity.
- Firms have agreed to M&A valued at more than $251B this month, Dealogic says. That surpasses a previous record month, July 2015, at $240B. The tech sector (signified most recently by Qualcomm's (QCOM -2.4%) $39B deal for NXP Semiconductors (NXPI +0.7%)) has accounted for a fourth of U.S.-targeted deals and 19% by value, just ahead of healthcare.
- Last week was especially hot, with $177B in activity (itself a record for an M&A week).
Thu, Oct. 27, 6:35 PM
- Prepaid wireless firm Cricket (NYSE:T) is throwing a bone to customers at its most popular plan tier, boosting the data allotment to 8 GB from a previous 5 GB.
- The mid-sized plan comes at $50/month and includes talk, text and that high-speed data.
- The 5 GB plan was comfortably ensconced between Cricket's $40/month plan (2.5 GB of high-speed data) and $60/month plan (10 GB) -- so it's too early to tell whether more plan-switchers might be enticed up to $50 rather than down from $60.
- It also offers a low-end $30/month plan (1 GB) and a $70/month unlimited plan.