M8.5: Term Project Submission

erm Project Outline
AT&T, Inc. is one of the largest telecommunications, media, and technology companies in the world, founded in 1982 and with its headquarters in Dallas, TX (AT&T, n.d.). The holding company operates through four main divisions: Warner Media, Communications, Xandar, and Latin America. The Communications division provides telecommunications services to consumers and businesses in the United States and globally. The Warner Media division develops, produces, and distributes television, feature films, and gaming content in digital and physical format. The Xandar division provides clients with advertising services, while the Latin America division provides customers with wireless and entertainment services outside the United States.
Last year, AT&T finalized a deal that saw the company acquire Time Warner Bros. (Kumar, 2019), its pay-TV competitor. Over the years, AT&T had been interested in the content and media business since growth in its core wireless and landline businesses continues to slow as a result of increased competition. The company had to make a move that would enable it to improve its media and content business. By acquiring Time Warner, AT&T combined its strengths in direct-to-consumer distribution with Time Warner Bros.’ content and creative talent. This way, the company was able to expand its market and provide more content to its customers (Zimmerman, Chang, & Ulrick, 2019). AT&T now owns high-quality original content and has a larger market for its content.
The term project will be composed of an introduction section providing a brief history of the company and its performance, the body section that will discuss the recent acquisition and its outcome (Kumar, 2019; Team, 2016), a recommendations section discussing how the company should have handled the transition to achieve better outcomes and a conclusion section to state the major points. Some of the major themes and topics that will be notable in the term paper include types of change, organizational change, resistance to change, change readiness, and models of change. 
References
AT&T. (n.d.). AT&T® Official Site – Phone Plans, Internet Service, & TV. Retrieved October 29, 2019, from https://www.att.com/.
Kumar, B. R. (2019). AT&T–Time Warner Acquisition. In Wealth Creation in the World’s Largest Mergers and Acquisitions (pp. 121-129). Springer, Cham.
Team, T. (2016, October 24). Why AT&T Is Buying Time Warner. Retrieved October 29, 2019, from https://www.forbes.com/sites/greatspeculations/2016/10/24/why-att-is-buying-time-warner/#6dc71f75758d.
Zimmerman, P. R., Chang, G., & Ulrick, S. W. (2019). A Prospective Competitive Effects Analysis of the AT&T/Time Warner Merger.

M8.5: Term Project Submission

Introduction

AT&T Inc. is an American multinational company that is headquartered in Dallas, Texas (AT&T, n.d.). It is one of the world’s leading telecommunications companies, one of the largest providers of mobile telephone services, and the largest provider of telephone services in the United States. It is also the largest entertainment and media company in the world, in terms of revenue, following the acquisition of Time Warner in 2018. AT&T Inc. is among the top ten organizations in the Fortune 500 rankings based on total revenue (AT&T, n.d.). The origin of the company can be traced back to the Bell Telephone Company, which was founded by Alexander Graham Bell after he patented the telephone. The American Telephone and Telegraph Company (AT&T) was one of Bell Telephone Company’s subsidiaries, established in 1885.

AT&T acquired the Bell Company in 1899 for legal reasons. The company then established various subsidiaries in the United States and Canada, rising to become the largest telecommunications company in the region and the world. AT&T Inc. operates through four main divisions: Warner Media, Communications, Xandar, and Latin America (AT&T, n.d.). The Communications division provides telecommunications services to consumers and businesses in the United States and globally. The Warner Media division develops, produces, and distributes television, feature films, and gaming content in digital and physical format. The Xandar division provides clients with advertising services, while the Latin America division provides customers with wireless and entertainment services outside the United States (AT&T, n.d.). Through its four divisions, AT&T can provide quality telecommunications services and products across the United States and globally.

Time Warner Bros. Acquisition

Last year, AT&T finalized a deal that saw the company acquire Time Warner Bros. (Kumar, 2019), its pay-TV competitor. Over the years, AT&T had been interested in the content and media business since growth in its core wireless and landline businesses continues to slow as a result of increased competition. The company had to make a move that would enable it to improve its media and content business. By acquiring Time Warner, AT&T combined its strengths in direct-to-consumer distribution with Time Warner Bros.’ content and creative talent (Team, 2016). This way, the company was able to expand its market and provide more content to its customers (Zimmerman, Chang, & Ulrick, 2019). AT&T now owns high-quality original content and has a larger market for its content.

The main motivation behind mergers and acquisitions is the quest for more market power or the power to kick out the competitors in the market and raise prices. AT&T and other telecommunications and media companies have been losing over the years with customers moving towards cheaper online streaming companies and services, such as YouTube, Hulu, and Netflix. Besides the migration of customers towards cheaper media streaming platforms, AT&T’s business was threatened by the intense competition from T-Mobile, another telecommunications company in the region. Just like other wireless carriers and network providers, AT&T had to cut down the cost of mobile data plans. However, this did little to fight the competition that the company faced. When the forces of competition combine with the struggle to realize growth, decisions such as mergers and acquisitions are considered.

AT&T’s acquisition of Time Warner Bros. was a strategic move to improve the performance of the company by acquiring a larger market share (Team, 2016). The media content created by Warner Bros. is unique and highly marketable. Combined with AT&T’s strengths and competencies, the company can provide customers with high-quality, differentiated, and mobile-first entertainment.

Benefits from the Acquisition

The newly formed company can secure its future through three main ways: premium content provision, Direct to Consumer Distribution (D2C), and High-Speed networks (AT&T, n.d.). The company now can distribute or provide robust premium content (Team, 2016), combining movies and shows from Turner, Warner Bros., and HBO, as well as targeted digital content from its other investments (Otter Media, FilmStruck, and Bleacher Report). At the moment, the company has more than 150 million D2C relationships across its video streaming, Television, broadband, and mobile services in the United States, Television in Latin America, and mobile in Mexico. It also has D2C digital properties such as CNN.com, Boomerang, FilmStruck, and HBO NOW, providing customers with premium service (Team, 2016). AT&T is also the leading fiber network and wireless network company, with huge investments in new, better technologies such as the 5G internet standards. It will, therefore, be able to provide quality network bandwidth that customers need to properly engage with premium video and virtual reality content.

Transition Challenges

While the acquisition of Time Warner Bros. was a huge and potentially beneficial move for AT&T, there are various challenges that the company faced, and continues to face, during the transition. Many employees of the two companies were resistant to the change that the acquisition brought. Resistance to change is one of the most common reasons why change implementation in organizations fails. Not only was the move by AT&T objected by the business community and some customers, but many of the organization’s employees were also opposed to the strategic arrangement. Besides resistance to change and other company-specific challenges, the company faced the unique challenge of merging a conduit business company – AT&T – with a content company – Time Warner Bros.

It is very difficult to merge different types of related businesses (Chatterjee, 2007). It is, however, possible, as can be witnessed from the successful merger between Comcast and NBCUniversal (Curtin, 2010). This merger was successful because of competent leadership and the unique nature of Comcast. A common mistake that many companies make is lumping up the conduit and content business models into one basket of providing customers with entertainment, while these two are very different. Conduit is generally a network business model. It involves maintaining physical plants and ensuring that they do not break. Content is largely human capital – content creators that are willing to make bets and take risks on potential hit movies and TV shows. The AT&T-Time Warner Bros. union will face challenges similar to those faced by the earlier AOL-Time Warner Bros. merger, which fell apart.

The merger between AOL and Time Warner Bros. failed because of short-term thinking and the clashing of organizational cultures (Wade, 2010). Many people at Time Warner were not enthusiastic about the internet, about the digital path, and were worried that these two might end up negatively affecting their businesses and work. These people played defense in an attempt to protect what was already existent rather than supporting the merger and focusing on the future (Wade, 2010). The result was that the two companies were managed as bunches of siloed and independent divisions, which ultimately led to the failure of the merger. If the company had been managed as one, without silos and resistance, it would have led the way in digital video and digital music in the world. AT&T must take lessons from the earlier merger between AOL and Time Warner to avoid making the same mistakes that the management of the companies made.

Recommendations

For a successful union between AT&T and Time Warner, the management of AT&T needs to break up any old silos within Time Warner. AT&T seems to be working towards this, with the management renaming Time Warner as Warner Media. The company had been organized under HBO, Warner Bros., and Turner units. Customers could find entertainment content under any of the three units. After the acquisition, AT&T has reorganized operations by the basis of the type of content into three divisions (AT&T, n.d.): Warner Media Entertainment, Warner Bros., and Warner Media News and Sports. HBO, TBS, TNT, truTV, and the D2C business were placed under the Entertainment division. Turner Sports, CNN, Bleacher Report, and the AT&T Regional Sports Networks were placed under the News and Sports division (AT&T, n.d.). The Warner Bros. division manages the TV, film, and games businesses, as well as animation, kids, and family entertainment content.

AT&T also needs to largely involve the employees in decision-making to ensure that they support any changes that will be made to ensure a smooth transition and the success of the merger. The company also needs to address the competition that it currently faces from its deep-pocketed competitors: Disney-Fox, Comcast-NBC Universal, and technology giants. While Warner Media seems to be improving AT&T’s business, beating these rivals will not be easy. The company needs to focus on its biggest business – wireline and wireless operations. While Warner Media saw the company’s revenue increase in 2018, wireline and wireless business revenues continue to shrink. This can be attributed to the company’s focus on Warner Media and the intense competition faced (from companies such as Comcast-NBC Universal and Disney-Fox). Energies should be focused on improving the company’s biggest business, while also managing any resistance to change within Warner Media.

Conclusion

Mergers and acquisitions are strategic arrangements that companies enter in their quest to achieve larger market shares and resource pools. By entering mergers and acquisitions, a company can realize growth, increase its market share, and achieve a larger resource pool. AT&T’s acquisition of Time Warner Bros. was a strategic move that saw the company become the largest telecommunications and content company in the United States. However, there are various challenges that the company needs to address to ensure a smooth transition and a successful acquisition. Resistance to change is the most common reason why change implementation in organizations fails. AT&T needs to break up the existing silos within Time Warner, now Warner Media, to ensure that the company is run like one. The company seems to have learned from the missteps of AOL, making necessary changes to ensure that success is achieved. It may some time to see whether the changes and restructuring done will ensure that the acquisition succeeds. However, the restructuring seems to have created a more efficient and effective way of operation for the company. The success of the acquisition hinges on execution. By managing resistance to change, breaking up old silos within the acquired company, and effectively managing competition, AT&T will ensure a smooth transition and guarantee its success in the industry.

References

AT&T. (n.d.). AT&T® Official Site – Phone Plans, Internet Service, & TV. Retrieved December 10, 2019, from https://www.att.com/.

Chatterjee, S. (2007). Why is synergy so difficult in mergers of related businesses? Strategy & Leadership, 35(2), 46-52.

Curtin, T. (2010). Achieving the Franchise: The Comcast-NBC Universal Merger and the New Media Marketplace. CommLaw Conspectus, 19, 149.

Kumar, B. R. (2019). AT&T–Time Warner Acquisition. In Wealth Creation in the World’s Largest Mergers and Acquisitions (pp. 121-129). Springer, Cham.

Team, T. (2016, October 24). Why AT&T Is Buying Time Warner. Retrieved December 10, 2019, from https://www.forbes.com/sites/greatspeculations/2016/10/24/why-att-is-buying-time-warner/#6dc71f75758d.

Wade, J. (2010). The failed merger of AOL/Time Warner. Risk Management, 57(4), 22.

Zimmerman, P. R., Chang, G., & Ulrick, S. W. (2019). A Prospective Competitive Effects Analysis of the AT&T/Time Warner Merger.