October 23, 2021

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WarnerMedia underestimated, like multiple cable network assets: AT&T CEO

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AT&T CEO John Stankey said the decision to shut down WarnerMedia – and to merge it with Discovery – came down to his belief that investors had devalued the telecom-owned media division.

“It’s just trading like a network property right now,” he said of WarnerMedia, speaking at the Goldman Sachs Communicopia conference on Tuesday. After splitting from AT&T, “We should start seeing [WarnerMedia] Valuable like any other direct-to-consumer business, “Stankey said.

Stankey felt that WarnerMedia management was working well on their strategy, but AT&T needed to separate its communications and media businesses so that maximum evaluation could be done and investors could be given a clear story. “I realized that all we have to do is formulate a different investment thesis,” he said.

In May, AT&T and Discovery announced the proposed merger of WarnerMedia and Discovery. Under the terms of the agreement, AT&T shareholders will own 71% of the new company and Discovery shareholders 29%. The new company will also accept debt incurred by WarnerMedia. The deal is expected to close in mid-2022.

Under Stanky, AT&T is opening up the big entertainment strategy started by Randall Stephenson, the former CEO of Telecom. DirecTV, which AT&T bought for about 50 50 billion, completed a spinoff from AT&T last month.

“I think we’ve got the right platform right now,” Stankey said. “We will not talk about restructuring next year. We will not talk about transactions. We are talking about how the management team has worked with a very thin and focused business in the best part of the communication field with a very focused strategy.

Regarding the progress of HBO Max, Stankey said, “I think I can say for sure that we have established a direct-to-consumer business that has a great future.”

By the end of Q2, HBO and HBO Max had 47.0 million U.S. subscribers, up 29% year-on-year and growing net profit of 2.85 million. Worldwide, HBO / HBO Max had 67.5 million subscribers, up 12 million from last year.

WarnerMedia expects the end of HBO distribution on Amazon Prime Video Channel to hit its third domestic HBO / HBO Max subbase in the third quarter. The company says 70 million -73 million global HBO Max and HBO customers will leave Amazon Prime channels by the end of 2021 due to the impact of HBO. To help offset the loss of nearly 50 million HBO subs through Amazon Prime, WarnerMedia has launched a short-term promo that offers HBO Max a 50% discount for six months.

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