AT&T Inc announced on Tuesday that it will spin off WarnerMedia in a $43 billion deal to merge its
media businesses with Discovery Inc, as well as halving its dividend.
AT&T shareholders will own 71% of the new Warner Bros. Discovery company and will receive 0.24
Warner Bros. Discovery shares for every AT&T share they possess. After the transaction concludes,
AT&T will have 7.2 billion diluted shares outstanding.
The telecoms company in the United States would pay a dividend of $1.11 per share, down from
$2.08 previously. This is at the lower end of AT&T’s prior forecasted $8 billion to $9 billion range.
In premarket trade, AT&T shares were down 5%.
Although the deal to unwind AT&T’s $85 billion acquisition of Time Warner was announced early last
year, some financial specifics were not revealed until Tuesday.
“Rather than try to account for market volatility in the near-term and decide where to apportion value
in the process of doing an exchange of shares, the spin-off distribution will let the market do what
markets do best,” AT&T CEO John Stankey said in a prepared statement.
“We are confident both equities will soon be valued on the solid fundamentals and attractive prospects
they represent.”
AT&T expects to spend around $20 billion in capital expenditures this year to expand its 5G cellular
footprint and invest more aggressively in fibre to the house broadband internet offerings.
Even if WarnerMedia’s HBO Max expanded faster in the fourth quarter, completing the year with 74
million subscribers, Warner Bros Discovery will be playing catch-up to larger streaming video
competition Netflix.
However, the merger, which is anticipated to finalise in the second quarter, will take place just as
Netflix begins to mature.