With the ruling of U.S. District Judge Richard Leon this week that the U.S. Government failed to meet its burden to prove that the proposed AT&T/Time Warner merger would be anticompetitive, the wireless carrier landscape has been forever changed.
The merger will be good for wireless, because it allows AT&T to bundle multiple service is key for its growth going forward, Tim Courtney, VP sales and strategy, Further Enterprise Solutions, told AGL eDigest.
“The cable companies know how to add customers by bundling phone, internet and TV, and wireless companies are going to have to do the same thing,” Courtney said. “Clearly AT&T is in the lead of figuring that out. It is a good thing for the wireless industry for sure.”
John Celentano of Technology Marketing & Sales Consulting was concerned about the concentration of the infrastructure across a range services.
“There is no real counterweight to compete with a combined AT&T/Time Warner,” Celentano said. “Smaller players don’t have the capex and wherewithal to mount a response. Are we reconstituting the Bell System?”
The combined entity will carry $249B of debt, according stats provided in a colorful MoffettNathanson blog, which noted that if AT&T were a country, it would rank 32nd on the list of highest total debt burdens, between Indonesia and the United Arab Emirates. Senior Analyst Craig Moffett adds that the EBITDAs supporting the debt at both companies are shrinking.
“AT&T is now – by far – the world’s largest issuer of investment-grade debt,” according to a research note that Moffett wrote. “But credit metrics like these – nearly 4x leverage against declining revenues and declining EBITDA – would typically be High Yield. AT&T will be under enormous pressure from the credit rating agencies to de- lever.”
Some question how the servicing of this size of a debt load will affect AT&T’s wireless infrastructure capex. “That is the burning question,” said Carrie Ortolano, general counsel, CTI Towers. “Where is AT&T going to get the money for all the infrastructure that needs to be deployed?”
The truth is AT&T will receive success-based payments of $6.5 billion over the next five years to build out the FirstNet network, and it is also using those visits to its existing and new towers to deploy equipment that can be upgraded to 5G with a software upgrade.
No matter how AT&T pays its bills, the additional video content that will be easily accessible to consumers will drive usage of its network, which must continue to be built out, according to Phil Burtner, chief engineer, NB+C Engineering Services. “My daughter currently uses 15 gigs a month and I see that number going up for young people who don’t even have cable TV,” Burtner said.