Who's helped, who's hurt, who's next after Time Warner takeover
Following the announcement that AT&T (T) will be acquiring Time Warner (TWX), Wall Street analysts have begun to speculate on what the deal could mean for the sector, with Needham analyst Laura Martin saying she expects industry consolidation to continue. PRESSURE ON OTHER MERGER DEALS: The announced acquisition of Time Warner by AT&T for $107.50 per share led some to question what this deal could mean for the sector. On Friday, Andrew Ross Sorkin, speaking on air on CNBC, said the deal news would put increased pressure on CBS (CBS) and Viacom (VIA; VIAB) to merge as well. This follows a report by The New York Post on Thursday saying that Viacom shareholders believe they will have a merger agreement with CBS by Thanksgiving. CONSOLIDATION TO CONTINUE: In a note to investors this morning, Needham analyst Laura Martin said that if the acquisition deal gets approved, AT&T protects itself defensively as it will keep Time Warner out of the hands of Apple (AAPL), Verizon (VZ), Comcast (CMCSA; CMCSK) and others, and becomes a key player in a competitive landscape of giants. Moreover, Martin noted that she expects industry consolidation that started in 2011 with Comcast's acquisition of NBC to continue. The analyst sees Scripps Networks (SNI) and Discovery (DISCA) as possible takeover candidates. NEWS POSITIVE FOR SOME: Two analysts at Oppenheimer commented on potential implications of the AT&T-Time Warner deal. Analyst Timothy Horan told investors that the transaction highlights the growing importance of over-the-top content and mobile video, which he believes will drive "strong" volume growth on networks/cloud across the board. He sees these trends as positive for towers, datacenters, fiber, and content delivery networks. In a note of his own, analyst Shaul Eyal told investors that the merger of AT&T and Time Warner potentially represents an interesting opportunity for Amdocs (DOX) if the deal is consummated, given the latter's expertise in executing large, transformational telecom projects in addition to introducing new products. A transaction of this size would potentially require the seamless migration of millions of subscribers from one platform to another, Eyal pointed out, saying that Amdocs has established itself as one of the most capable vendors in the industry, with a proven track record demonstrating its ability to migrate large numbers of subscribers following major industry consolidations. Further, the analyst noted that AT&T is Amdocs largest customer. He reiterated an Outperform rating and $65 price target on Amdocs' shares. PRICE ACTION: In late morning trading, shares of AT&T have dropped about 1.5% to $36.91 while Time Warner has fallen more than 2% to $87.49 per share. Discovery Communications is flat near $26.62, Scripps Networks is fractionally lower at $65.93 and Lionsgate (LGF), another owner of television properties and a film studio, is up about 2% to $20.06.