AT&T CFO on WarnerMedia Sale: Market Didn’t Give Us “Appropriate Credit” for HBO Max - Hollywood Reporter

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AT&T decided on pursuing the planned merger of WarnerMedia with Discovery because the stock market didn’t give the telecom giant enough credit for the launch and success of streaming service HBO Max, AT&T CFO Pascal Desroches told an investor conference on Tuesday.

AT&T CEO John Stankey was “keenly focused on” the company being in the early stages of a “significant evolution in connectivity,” 5G and fiber, with management knowing it needed to invest there and in HBO Max, he told the Oppenheimer Annual Technology, Internet & Communications Conference.

“One of the things we realized (was that), even though we were succeeding in our launch of HBO Max, the market wasn’t giving us the appropriate credit for it,” Desroches said.

“We felt a more efficient” set-up to give WarnerMedia “its own capital structure and stock” was better “so that investors who are interested in media would be able to invest directly into WarnerMedia,” the CFO explained. He said the Discovery deal would “unlock value for shareholders.”

Discussing cost-cutting targets, Desroches said the plan to reach $6 billion at core AT&T remained in place. Cost savings at WarnerMedia that have been reached on top of that have been “meaningful” over the last three years, which has allowed the company to invest more in HBO Max, he said.

At another recent conference, Desroches discussed the mid-2022 target time for the closing of the deal to create what will be known as Warner Bros. Discovery, saying: “We are hopeful that we are conservative in our outlook in terms of the time that it is going to take to get it approved, but we don’t know.” And Desroches emphasized at the time: “We are not concerned at all that this could be challenged from a regulatory standpoint.”

Last week, Discovery CEO David Zaslav similarly argued: “The regulatory process continues to move forward as planned, giving us confidence in our previously stated time frame of mid next year to close.” He added: “I was in DC last week. I met with (people) across the board, spent the full day. There is broad support for this transaction.”

Zaslav also highlighted: “We haven’t heard any pushback. We have seen green lights. … Everything so far is extremely positive.”

In mid-May, AT&T unveiled a deal to spin off WarnerMedia, merge it with Discovery and get $43 billion, in the process creating a new global content powerhouse with scripted and unscripted programming. AT&T will use the sale of its entertainment unit to reduce debt and focus on its connectivity business.

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AT&T CFO on WarnerMedia Sale: Market Didn’t Give Us “Appropriate Credit” for HBO Max - Hollywood Reporter
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