How AT&T became the world's most indebted company (and what HBO has to do with it)
Shopping, shopping, and more shopping. That's how telecommunications giant AT&T has become the world's most indebted company.
Over the past two years, the company's management has not hesitated to pull out its checkbook to grow and land in sectors with a future beyond its basic telecommunications business.
It's no secret that the major technology companies have long had the content and streaming industry in their sights as the place to diversify their business and attract a larger audience to the Internet.
Their debt amounts to almost US$180 billion between different financing vehicles. The figure far exceeds the GDP of Ecuador and Bolivia combined.
In 2015 it bought the satellite TV provider DirecTV for US$48.5 billion.
And in mid-2018, it staged one of the largest mergers in corporate history by taking over the Time Warner entertainment group for approximately US$86 billion.
In Mexico alone, between 2014 and 2015, it acquired two companies in the country: Iusacell and Nextel, for about US$4 billion.
"AT&T, the market leader in almost all its businesses, has valuable assets, predictable revenues, healthy margins and consistent practice of long-term investment," the rating agency Moody's praised in a report, later recalling that the immense debt represents a strong risk for the future.
The hope is HBO and the growing streaming market in which AT&T wants to position itself.
It is with this platform that the telecommunications giant wants to enter the battle against Netflix, Amazon Video, Apple and the new Disney+ offering.
Experts believe that after the incorporation of Time Warner under its brand, the American company will not lack weapons to attract subscribers to its services, in a business that is increasingly disputed.
With the purchase of Time Warner, AT&T has also incorporated CNN, TNT, and TBS, as well as other valuable entertainment companies and the Warner Bros film studio, which has franchises such as Harry Potter, DC Comics and Cartoon Network.
This means hours and hours of content that the operator wants to offer through HBO Max, a platform that is expected to be launched in May 2020 and will bring together the entertainment offerings of HBO and Turner.
Local versions should arrive in Latin America and Spain by the end of that year or early next year.
Its price will be the highest among all streaming players.
According to NBC News, the service will debut at a price of US$14.95 per month, which could cool off consumers' appetites.
The company's CEO, Randall Stephenson, defended this price, arguing the wide range and quality of the service.
Not surprisingly, HBO and Warner Media have the series The Big Bang Theory, Game of Thrones, Sesame Street, The Sopranos and Sex and the City.
It will also steal Netflix one of the most-watched series on its platform: Friends, while investing $1.5 to $2 billion in producing its own content over the next two years.
The goal is to reach 50 million subscribers by 2025.
HBO Max will also add news, live sports, and cartoon programming for children through Cartoon Network and Looney Tunes.
In total, HBO Max will have 1,800 movies on its launch day, or about 10,000 hours of content.
These include the sagas of The Matrix, The Hobbit, The Lord of the Rings and DC Entertainment films such as Batman and Superman.
Netflix's basic subscription in the United States is $8.99 per month, the same price as Amazon Video.
Disney+ costs $6.99/m, which includes full access to its four-screen, ad-free catalog, while AppleTV costs $4.99/m.
"AT&T needs to find the right balance between price and content to beat Netflix, Amazon.com, Hulu, Disney, and NBCUniversal," said John Butler, senior analyst at Bloomberg Intelligence.
"Prior to its acquisition by AT&T, Time Warner's HBO subsidiary struggled to attract a significant audience for its streaming app, HBO Now, suggesting that the service did not have enough compelling content," he says.
But beyond subscribers, Bloomberg Intelligence analysts point out that AT&T will use customer data to place targeted advertising, a business that generates significant annual revenue.
So, with debt maturities nearing $9.2 billion in the next 12 months, the company will have to run all its divisions at full capacity or, as many warn, sell some of its most coveted assets.
Source BBC Mundo