WarnerMedia, with its premium entertainment, sports and news assets, is being combined with Discovery’s leading nonfiction, international and sports businesses to create a standalone global entertainment company with a solid leadership position in the global direct-to-consumer (DTC) race.

The opportunities in DTC streaming are rapidly evolving, and to keep pace and maintain a leadership position, several things are required – global scale, access to capital, a broad array of high-quality content and industry-best talent.

The WarnerMedia team has done a phenomenal job in coming together over the past couple of years, and this deal is possible only because of what they’ve achieved together.

This is the next step in enhancing the value of WarnerMedia and creating its future globally.

WarnerMedia is the most-awarded leader in scripted entertainment, animation, news and sports…and their strong, consistent execution has cemented their foothold in the U.S. in addition to positioning them well for continued growth and rapid international expansion.

Discovery is a leader in unscripted, real-life entertainment, and by combining these two, it creates one of the most compelling content portfolios in the world and enables the new combined company to have a content spend that exceeds most of its industry peers.

By doing this now, WarnerMedia will be better suited to self-fund its growth moving forward, and AT&T will have better flexibility to invest in 5G and fiber to support the growing, long-term demand for reliable, high-speed connectivity.

We expect doing this will accelerate growth in AT&T’s business and WarnerMedia’s business. Separating these businesses into 2 independent companies – one broadband connectivity and the other media – can attract the best investor base for each company.

We believe the opportunity for the new, combined media company to grow globally has a much larger multiple, and it outweighs the value creation from AT&T owning the asset.

For AT&T and its shareholders, this transaction provides an opportunity to unlock shareholder value and benefit from AT&T’s ability to capitalize on the longer-term demand for connectivity.

AT&T’s shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company.

We expect the combination of WarnerMedia and Discovery will create substantial value for shareholders of the new, combined company by:

Bringing together the strongest leadership teams, content creators and talent relationships in the media business.

Accelerating both companies’ plans to deliver leading DTC streaming platforms.

Uniting complementary and diverse content strengths with broad appeal — WarnerMedia’s robust portfolio of iconic scripted entertainment, animation, news and sports with Discovery’s global reach in real-life, nonfiction entertainment.

Creating significant synergies for the new company to invest more in content and scale its global DTC platforms.

After close, which is expected in mid-2022, AT&T will be more focused and better positioned to capitalize on the growing long-term demand for connectivity.

AT&T plans to continue momentum in its Mobility business by stepping up its investment in its wireless network.

AT&T expects to reach 200 million POPs with 5G C-band spectrum by the end of 2023.

AT&T intends to more than double its current Fiber footprint by the end of 2025, reaching 30 million customer locations, with the single goal of offering the best fixed broadband service in the market.

Under the terms of the agreement, which is structured as an all-stock, Reverse Morris Trust transaction, AT&T would receive $43 billion (subject to adjustment) in a combination of cash, debt securities and WarnerMedia’s retention of certain debt.

The new company will compete globally in the fast-growing direct-to-consumer business – bringing compelling content to DTC subscribers across its portfolio, including HBO Max and discovery+.

The transaction will combine WarnerMedia’s storied content library of popular and valuable IP with Discovery’s global footprint, trove of local-language content and deep regional expertise across more than 200 countries and territories.

The complementary nature of WarnerMedia’s business and Discovery’s enables several important things:

In linear, their combined programming line-up will stretch across key advertising demos, strengthen their value prop in fast-evolving markets, broaden their audience and deliver more value to their distribution partners.

In DTC, WarnerMedia will add Discovery’s important and popular content genres and strengthen their efforts to scale internationally.

The new company will also be able to:

Increase investment and capabilities in original content and programming.

Create more opportunity for under-represented storytellers and independent creators.

Serve customers with innovative video experiences and points of engagement.

Propel more investment in high-quality, family-friendly nonfiction content.

The success of WarnerMedia’s evolution over the last 3 years has demonstrated their right to lead the future of media, and their combination with Discovery in a distinct stock will improve the flexibility to effectively finance those plans.

The fact of the matter is direct-to-consumer is a global opportunity that is rapidly evolving. And the pace of that evolution is accelerating. To compete and win you must build global scale.

This is a move to unlock the additional value embedded in our media business and gives it the tools – talent, content and capital – to ensure its success as a world-class player.

Together, WarnerMedia and Discovery will have one of the most exciting global content portfolios in entertainment, and we expect that they’ll have a combined content spend that exceeds most of their industry peers.

This also creates a substantial value opportunity for AT&T shareholders, including its employees who own AT&T shares. They will retain their stake in AT&T and get a stake in a new, exciting global media leader.

This deal provides an opportunity for parallel growth in both telecommunications and media, which many would argue we weren’t realizing as a single company.

By doing this deal now, WarnerMedia will be in a stronger position to self-fund its growth and AT&T will have increased flexibility to invest more in 5G and Fiber to be the country’s leading broadband connectivity provider.

The strategy behind the acquisition was sound and AT&T’s business has performed well because of it, as has WarnerMedia’s business.

AT&T’s distribution expertise and competitive market position coupled with WarnerMedia’s remarkable brands and content were both necessary to establish HBO Max, which collectively created substantial value.

And as we’ve seen, bundling HBO Max with AT&T’s best wireless and broadband offers has lowered churn and increased customer value.

The fact of the matter is direct-to-consumer is now a global opportunity that is rapidly evolving. To compete and win, you must build global scale.

We believe the opportunity for the new, combined media company to grow globally has a much larger multiple, and it outweighs the value creation from AT&T owning the asset.

We could continue to execute as a single content and connectivity company…the strategy is working, but we believe the better path forward is to separate these businesses into 2 independent companies – one broadband connectivity and the other media – to attract the best investor base for each company.

We expect doing this will accelerate growth in AT&T’s business and WarnerMedia’s business.

The strategy behind the WarnerMedia acquisition was sound and the business has performed well because of it, as has AT&T’s telecommunications business.

The unique combination of AT&T’s distribution muscle, broader trading relationships and competitive market position, coupled with WarnerMedia’s remarkable brands and content were both necessary to establish HBO Max, which collectively created substantial value.

Regarding DIRECTV, some aspects of the transaction declined faster than expected, but AT&T generated around $4 billion in cash from the business that helped other parts of the company grow, including the launch of HBO Max.

AT&T expects to receive at least $16 billion in value from the spinoff of DIRECTV, and it will still own 70% of the business and participate in future upside.

Even today, as the deal is structured, AT&T has already captured over 100% of what it paid. $59 billion was the implied value of the stock the day before the deal was announced, representing what AT&T shareholders will get in the new media company — plus the $43 billion AT&T will receive at close.

Add to that the WarnerMedia asset sales AT&T already completed and the cash that AT&T already received from WarnerMedia since 2018, and the company is comfortably above the $100 billion total value it paid for Time Warner.

Through expected synergies of $3 billion annually and the natural re-rating of the new media company’s stock in future years after close, AT&T expects the new media company to deliver a total shareholder value well above what it paid for Time Warner only 3 years ago.

All in, AT&T sees the transaction generating substantial incremental shareholder value above what it paid for Time Warner, potentially as much as 30% or more. And that’s separate from the benefits of the deal to the telecommunications company and its shareholders.

The simple answer is that there are no changes. Keep doing what you’re doing. WarnerMedia and AT&T should both continue working toward their respective goals.

The transaction is anticipated to close in mid-2022.

Your focus on the business at hand, especially through the pandemic, has been outstanding and our business results reflect that.

We need to continue that momentum.

We plan to continue building on WarnerMedia’s momentum, as its success is all of our success. AT&T shareholders will own 71% of the new company when the deal closes.

We wanted to ensure that investors interested purely in our communications company had an opportunity to enjoy the benefits of the great growth that we’re generating in our core business.

Many investors expressed concern about our balance sheet and the amount of debt the company is carrying with multiple businesses to invest in.

This deal allows us to repair the balance sheet, create a cleaner investment opportunity with our communications stock, and restore confidence that we’ll continue to be competitive moving forward.

Based on the way we set up this deal, we expect to see some improvement in the valuation of the AT&T stock.

In connection with a spin-off, the existing shareholders of AT&T at close will continue to hold their shares in AT&T but will also hold 71% of shares of the new media company. The expected value of those shares (based on the capitalization as of May 14, 2021), is in the $7-$8 range per share of AT&T stock, or the equivalent of 4+ years of AT&T’s current annual dividend, tax free.

As usual, the new shares will be handled by an administrator. Stockholders will be notified of their shares automatically through a third-party company.

Stockholders will have the option to maintain their stake in the new media company and benefit from any appreciation, or, for those who prefer dividend income, they may sell their shares of the new media company and reinvest in dividend stocks, including AT&T.

We hope to continue our valuable partnership bridging AT&T products and services with HBO Max. This transaction will also allow the new company to pursue additional distribution deals. Discussions on how these partnerships will continue or in what capacity are ongoing.

We are also still considering what happens to the various employee discounts across the companies and will share more details when we have them.

No decision has been made whether to combine the platforms, as we expect the transaction to close in mid-2022.

In the meantime, our mission and direction remain the same.

The market and product strategies underway across WarnerMedia are consistent with the goals of the merged, post-close company.

During the review period, we need to continue driving the momentum on our existing business plans.

So, keep doing what you’re doing – we are not waiting on direction, hitting the pause button or resting on our market position.