C114 News on July 21 (Ace) A report from market research company Omdia shows that AT&T and Discovery have reached an agreement under which the two parties will merge WarnerMedia and Discovery and split the entity into an independent global entertainment company. The two companies expect the transaction to be completed in mid-2022. This transaction has not only changed AT&T’s recent focus on the main areas, but also changed its digital service strategy.
AT&T will refocus on core business
When HBO Max merged and split with WarnerMedia, this changed AT&T’s main focus area as a company-most recently 5G, optical fiber and HBO Max. There is no indication that AT&T intends to replace HBO Max with another focus area. On the contrary, AT&T is doubling down on core businesses such as 5G and optical fiber.
After announcing the WarnerMedia/Discovery transaction, AT&T provided detailed information on its 5G and fiber optic additional investment plans. AT&T said that the company will now accelerate the launch of C-band 5G network services, from the original plan to reach 100 million users by the end of 2023, to 200 million users at the same time. AT&T also plans to more than double its fiber optic network coverage by the end of 2025, from the current 14 million customer sites to 30 million. These investments will help make AT&T more competitive in the mobile and fixed broadband fields and lay the foundation for various digital services running on top of it.
WarnerMedia/Discovery deal changes AT&T’s digital strategy
Kristin Paulin, senior analyst of Omdia’s US service provider market, said that this transaction not only changed AT&T’s main investment area, but also changed AT&T’s digital service strategy. AT&T has gradually shifted from digital services in the B2C field. First of all, AT&T withdrew its digital life smart home business, no longer expanding the business, but just maintaining the service, and continue to sell in the market where it already provides the service. Now, the WarnerMedia/Discovery deal will weaken its gaming division, Warner Bros Interactive Entertainment. According to reports, AT&T plans to split it, some of the games will still be in charge of AT&T, and other games will be part of the transaction. Finally, the huge loophole of AT&T’s B2C digital service business is the loss of HBO Max.
After the transaction is completed, AT&T’s B2C digital service business will be a streamlined gaming department, a smart home department that is no longer expanding, and a partnership with Spotify to provide digital music service bundles that use AT&T mobile unlimited packages.
On the B2B side, AT&T’s and digital services businesses continue to flourish—including connected cars (AT&T is a market leader in this area) and other IoT solutions, smart cities, and other areas.
So, what can we expect in the future? Now that AT&T has disbanded the two large companies it recently acquired-Time Warner and DirecTV, it is unlikely to make any major changes in strategy in the short term and will focus on its core business. In the 5G era, having a strong digital service foundation will give AT&T the opportunity to carry new applications, especially in the Internet of Things.