Will The AT&T/Time Warner Merger Create The Most Expensive Equity In U.S. Trading History?


We could debate the odds of the AT&T (NYSE:T) and Time Warner (NYSE:TWX) merger being approved by Washington regulators. We could also debate whether it is a good idea for consumers and competition in the telecommunications and media industries. One can argue the integrated media/telecom delivery of video over the Internet is our future, as Verizon (NYSE:VZ) has taken over America Online and Yahoo. But in this article, I want to focus the discussion purely on the numbers of the merger proposal, including the huge amount of financial leverage involved. I'm going to throw a bunch of numbers at you, so sit tight and enjoy the math.

Just to be clear, I am quite happy with the AT&T U-verse fiber Internet service to my home. It is about the same price, speed and overall value as the competing fiber offerings available in my area of the world. I have been a loyal and generally satisfied landline, DSL, and now fiber AT&T customer over the decades. My gripe as a potential investor revolves around the massive amount of debt and liabilities the company continues to acquire and will need to finance at higher cost once interest rates rise again. The Time Warner buyout requires another sizable jump in debt, liabilities and goodwill "asset" accounting.


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