Opinion

The Great Debate

from Breakingviews:

AT&T deal dialing emits a shaky signal

By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

AT&T’s deal dialing is emitting a shaky signal. First, it wanted T-Mobile US for more domestic subscribers. After regulators nixed the idea and Verizon cleaned up its wireless joint venture, AT&T pursued Vodafone for European growth. Now, amid U.S. pay-TV consolidation, DirecTV or Dish beckons at home. The rationale is questionable and suggests the broader strategy is wayward.

The $190 billion company’s desire for a large-scale deal is understandable. AT&T’s revenue increased just 2 percent last year. Europe appealed because of a technology gap related to wireless speeds that AT&T theoretically was in a position to fill. The overseas market caught on, though, and the logic behind a foray there dissipated just as quickly.

With domestic cellular consolidation seemingly out of reach and Europe suddenly less attractive, AT&T boss Randall Stephenson is turning his attention to satellite TV as Comcast tries to buy Time Warner Cable. DirecTV, at $45 billion, hardy looks a good fit, though. The company, which has bounced in various iterations from Howard Hughes to General Motors to Rupert Murdoch and cable magnate John Malone, now generates about $3 billion of free cash flow a year. Its Latin American business is growing, too.

Under AT&T, DirecTV might be able to negotiate better programming deals. Even so, satellite TV faces a bleak future. It can’t compete with cable when it comes to delivering internet to homes or match the selection and convenience of fast-growing services such as Netflix. Outside rural areas, where broadband is scarce, customers almost certainly will choose online options instead. Buying a business past its technological prime hardly seems an optimal use of AT&T’s capital.

from Breakingviews:

Rob Cox: The worry now is a brewing M&A bubble

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Stop worrying about the tech bubble – there may be an even bigger one inflating beyond the confines of Silicon Valley. The corporate urge to merge has gone into global hyper-drive this year. Deal activity has surged as investors egg companies on and bid up the shares of acquirers well beyond mathematical explication, or prudence. As new metrics from interested parties are trotted out to justify the irrational, it’s time to exercise caution.

So far this year companies have announced some $1.3 trillion worth of transactions around the world, according to Thomson Reuters data. That’s nearly double the level of activity a year ago. European corporations have fueled even greater increases. Much of this is pent-up demand and a delayed response to the past year’s remarkable runup in stock market values.

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