Time Warner Executives Tout AT&T Deal, Talk FCC Role, Hulu Stake
CEO Jeff Bewkes reiterates that creative success will remain in focus after the deal as his team says Warner Bros. is on track for a record full-year profit and the consumer products business also is eyeing a record.
Time Warner, which has agreed to be acquired by telecom giant AT&T in an $85.4 billion deal, expects the merger to provide "long-term value into the future," chairman and CEO Jeff Bewkes said Wednesday.
The exec made the comments on a conference call with analysts after the conglomerate reported its third-quarter earnings that also included various other questions about the mega-deal, to which Wall Street has given a mixed reaction. Some media investors and analysts suggested it could run into regulatory hurdles and not bring all the benefits promised. Jefferies analyst John Janedis wrote in a report: "The deal will receive intense regulatory scrutiny."
Bewkes on Wednesday again touted the "enormous" opportunities of the deal for innovation and the launch of new products, services and types of content. He also reiterated that he and the heads of Time Warner's three divisions — Warner Bros., HBO and Turner — will remain with the company once the deal closes as AT&T wants to retain the creative relationships and focus of the company.
"I'm not going anywhere," Bewkes reiterated, saying he would be staying for “quite a period of transition” after the deal closes.
“Most of creative input comes from outside the company," from creatives working with company executives, Bewkes said in response to a question about how HBO and other units will maintain their reputation for content excellence. "That’s the essence of Time Warner."
The remarks echoed previous comments in which the exec said the AT&T deal would actually provide benefits and new opportunities for creatives, as creative success was a key part of the Time Warner DNA that the telecom giant also wants to protect.
Asked how Time Warner's 10 percent Hulu stake would be affected by the deal, Bewkes said he expected "no change," saying it is a passive stake and adding, "I don’t think the merger changes anything."
But the exec said one effect of the deal on the digital space would be that it would add a competitor for Google and Facebook, which he said dominate digital advertising.
The regulatory review of the AT&T deal also was a topic of debate. General counsel Paul Cappuccio said that Time Warner has one broadcast license and a number of operating licenses and is currently "looking into [which], if any," need to be transferred to AT&T. If there is such a transfer, the FCC would review the deal. If the company transfers to AT&T licenses allowing it to use public airwaves, which are FCC-regulated, the agency would be involved in the deal review in addition to the Justice Department, which checks for antitrust issues.
"There aren’t material licenses that are the bedrock of our business that AT&T would need," suggested Cappuccio. Some observers have suggested Time Warner could also sell licenses if they are not needed by AT&T but would draw an FCC review.
Bewkes said the expectation remains that the deal will be completed by the end of 2017, if not earlier.
Asked if Time Warner had held talks with other potential buyers, Bewkes declined to address the issue and said he wants to instead focus on the transaction at hand.
Meanwhile, Time Warner CFO Howard Averill said on the call that Warner Bros. was on track for a possible record full-year adjusted operated income before depreciation and amortization.
Management said that the company's consumer products business was having a record year as well. “This business can be an important growth driver going forward,” Bewkes said.