The Case For Indebted AT&T To Sell CNN Isn’t Clear Cut...

[IceWizard]

The Case For Indebted AT&T To
Sell CNN Isn’t Clear Cut


Dec 15, 2020,01:37pm EST

Jonathan Berr 
Senior Contributor






Will AT&T succumb to pressure from what the Wall Street Journal described as
“takeover interest in the private-equity world” to sell CNN?
Not as long as President Donald Trump remains the occupant of the White House.

Trump’s relationship with CNN is so contentious that many pundits have
argued that it was a factor in the government’s unsuccessful attempt to
block the deal. Indeed, the optics of selling CNN now would be awful.

"The fear among AT&T executives was that any perception the company
had folded under political pressure would weaken its hand in other policy
battles and could scare away creative talent at other parts of WarnerMedia,”
the newspaper said.

AT&T, however, may change its tune after President-Elect Joe Biden takes
office next month, given the company’s financial challenges. Moreover,
CNN’s record ratings may encourage the second-largest wireless provider
to “strike while the iron is hot” bore the network’s viewership slips to pre-pandemic
levels.  Even then, a CNN sale might not make sense.

MoffettNathanson analyst Craig Moffett told me earlier this year that while CNN
would fetch a “premium” valuation in a sale, “given how weak TNT and TBS
have become, (selling), it would leave behind an even bigger mess.”

The telecommunications giant landed on Wall Street’s “Naughty List” in 2015
after its  $49.5 billion acquisition of struggling satellite TV provider DirecTV.

Three years later, AT&T added CNN parent Time Warner for $85.4 billion
along with the famed Warner Bros. film and TV studio and cable networks
such as HBO, Cartoon Network, TBS, and TNT.

CEO Randall Stephenson made big promises after both deals that failed
to come true. As a result of the transactions, AT&T amassed $152.9 billion
in debt, the most of any company in the world, which continues to weigh
down the company’s stock price.

Shares of AT&T slumped nearly 9 percent over the past five years,
underperforming rivals such as Verizon VZ, which gained 33 percent
during the same time, and T-Mobile, which surged almost 260 percent.
The S&P 500 Index, a proxy for the broader market, gained more than
80  percent since 2015.

Earlier this year, Stephenson announced his retirement as AT&T CEO.
Chief Operating Officer John Stankey, whose background was mostly
in its core telecom business, succeeded him. Stephenson, who is now
AT&T’s Executive Chairman, is 60, two years older than his successor.

Stankey has also begun to divest non-core assets. Earlier this month, A
AT&T said it would sell its Crunchyroll anime business to Sony for $1.18
billion. Private equity players such as Apollo Global Management APO and
Churchill Capital reportedly have bid $15 billion for DirecTV, according to
The Journal. The deal should happen next year. AT&T also is mulling a
possible sale of its Xandr advertising business.

CNN took about $1 billion on profits in recent years though the
Coronavirus Pandemic has reportedly hurt the network’s bottom line
as it has with most media outlets. According to the Journal,  CNN
will miss its 2020 profit targets by $100 million to $120 million.
Given the challenges, AT&T faces in its core wireless business, and
at WarnerMedia, the headaches of owning CNN seem manageable
in comparison.  However, AT&T may need to unload CNN to jumpstart
its moribund stock price.

[Lechter]

CNN's value is falling faster than parrot poop.