almost 3 years ago • 3 mins
US telecoms giant AT&T agreed on Monday to merge its WarnerMedia content business with rival Discovery, in a bid to create a brand new king of the media jungle.
What does this mean?
AT&T only bought WarnerMedia – home to HBO, CNN, and Warner Bros. Entertainment – three years ago. But it’s already planning to spin off the unit into a standalone company which – combined with Discovery’s sports, science, and reality TV empire – could be worth up to $150 billion.
WarnerMedia and Discovery currently have complementary content footprints, and the combined business – 71% of which would be owned by AT&T and 29% of which by Discovery’s current shareholders – would control everything from Superman movies to European Olympics coverage. So if the deal ends up getting the go-ahead from regulators, it’d mean some potent competition for the likes of Disney+ and Netflix…
Why should I care?
The bigger picture: Be skeptical of the hype.
If you think AT&T’s ownership of WarnerMedia sounds short-lived, you’re not wrong. But big merger deals don’t always go to plan, which is why investors – like Discovery’s on Monday – often send their shares down on the back of the announcement. In fact, research from management consultancy McKinsey suggests that a lot of small linkups over a longer period tend to add more value than one blockbuster merger.
Zooming out: There are bigger fish to fry.
Netflix may have 208 million subscribers, but AT&T and Discovery’s flagship subscription services – Discovery+ and HBO Max – both grew faster than the streaming frontrunner last quarter. Still, even if these two do join forces, it’ll likely be a long time before they feel confident enough to start cranking up prices on their combined 59 million customers – and even longer before they start turning a profit like the OG streaming platform.
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A key emerging market (EM) stock index has slid almost 10% since its mid-February high, as investors start to realize there’s no place quite like home.
What does this mean?
Investors seem to have been spooked by the surge in coronavirus infections in countries like India and Brazil, as well as the ever-present threat of inflation. Just the prospect that the US Federal Reserve will raise interest rates, after all, is steering investors away from stocks and toward safer bets like new government bonds.
That’s not EMs’ only interest rate-based concern either. The move would likely encourage investors to put more of their money into higher-yielding US assets, which would push up the value of the US dollar. And when the dollar’s strong, both EMs’ dollar-denominated exports and their borrowing in the currency becomes more expensive, hurting their economies and company earnings alike.
Why should I care?
For you personally: EM stocks aren’t a monolith.
Still, JPMorgan and State Street think there are EM opportunities out there. They reckon you should look at the places – namely Mexico and Taiwan – that have strong trade links to the US and could therefore benefit from the country’s economic recovery. You might also want to look at big exporters of raw materials, whose prices are rising as countries look to rebuild their economies. That, the money managers say, could be good news for South Africa and – oh, hello again, Mexico.
Zooming out: ESG is the future.
Major investors are increasingly focused on meeting environmental, social, and governance (ESG) targets, and they’ve turned to EM stocks to help them do it. Some argue EM companies are less likely to exaggerate their eco-credentials than their developed peers: they’re not obliged to disclose ESG metrics, so there’s not exactly any pressure to pretend they’re more virtuous than they are.
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