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AT&T Merger Makes Telecoms Attractive

AT&T’s (T) $85.4 billion blockbuster merger with Time Warner (TWX) went through because a federal judge overruled an out-of-character antitrust move by the Trump Administration’s Department of Justice.

“The judge, Richard J. Leon of U.S. District Court in Washington, said the Justice Department had not proved that the telecom company’s acquisition of Time Warner would lead to fewer choices for consumers and higher prices for television and internet services,” according to the New York Times.

The combined company will be a media and telecommunications powerhouse. It will own CNN and a wireless and satellite network to stream on mobile devices.

Harley Lance Kaplan, managing principle, for Beta Industries, a financial planning firm in Sherborn, Mass., has been spending a lot of time studying the telecom sector for value plays. He said this ruling, which suddenly allows vertical acquisitions may allow content companies to go in and buy telecommunications assets, when previously they had been worried about the administration’s antimerger stance.

Kaplan, whose claim to fame was telling people to buy Google (GOOG) and Apple (AAPL) in Barron’s in early 2009, said AT&T is a long-term buy after falling 6% on the deal going through. The stock is down 15% from the start of the year.

Kaplan said the Dallas-based AT&T needed to do something: “It said, ‘content is expensive, so let’s just buy something’.” He thinks the merger should quickly be accretive to the bottom line. In 2017, Time Warner posted a profit of $5.2 billion on revenue of $31.7 billion. He added AT&T will protect its $2 annual dividend, which after the stock drop is now yielding 6.2%.

Most analysts think the next big media deal is between Comcast (CMCSA) and Disney (DIS), which are both battling for ownership of 21st Century Fox (FOXA). – Forbes
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