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Viacom, AT&T negotiations weigh on possible CBS tie-up: sources

Viacom, AT&T negotiations weigh on possible CBS tie-up: sources

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(Reuters) – Viacom Inc’s bitter contract renewal talks with AT&T Inc’s DirecTV that would see the blackout of MTV, Nickelodeon and Comedy Central by midnight Friday are weighing on a doable tie-up of CBS and Viacom, sources acquainted with the discussions mentioned.

FILE PHOTO: The Viacom workplace is seen in Hollywood, Los Angeles, California, April 24, 2018. REUTERS/Lucy Nicholson

Though the boards of CBS and Viacom haven’t mentioned or selected pursuing a merger, these sources say they’re finding out AT&T’s affect on Viacom and the way it impacts the corporate’s motivation to pursue a CBS merger. Viacom must resolve the AT&T contract earlier than contemplating some other strategic strikes together with mergers and acquisitions, sources mentioned.

Each corporations are managed by the Redstone household’s Nationwide Amusements Inc, which pushed for a merger final yr however backed off as CBS explores different choices earlier than deciding on one other run at Viacom.

Viacom would take a considerable monetary hit with out an AT&T deal. AT&T is Viacom’s largest distributor, representing 24.5 million complete video subscribers, and was answerable for about 15 p.c of Viacom’s 2018 income. At stake are about $2 billion yearly in charges and promoting, that are seen declining in any new deal, in keeping with Wall Avenue estimates.

The 2017 Viacom and Constitution Communications Inc renewal resulted in a 15 p.c price lower. An identical final result with AT&T may result in a $156 million drop in annual affiliate charges paid by AT&T to Viacom, though some analysts have estimated an approximate 10 p.c lower this time.

Viacom and AT&T declined to remark. Negotiations continued as of Friday afternoon, sources mentioned.

Failure to succeed in a deal is seen emboldening CBS and Viacom’s controlling shareholder’s place to place the businesses collectively to present them higher leverage in future distribution contract talks.

“Viacom’s clear want for higher negotiating leverage after being dropped by AT&T is perhaps the ultimate issue essential to drive the long-speculated CBS-Viacom merger given the widespread management of each corporations by the Redstone-controlled Nationwide Amusements,” Credit score Suisse analyst Doug Mitchelson mentioned in a analysis observe this week.

If AT&T and Viacom stroll away from the desk, the No. 2 U.S. telecoms firm’s place is also weakened, particularly if it faces a mixed CBS and Viacom by the tip of June, when CBS’s contract with AT&T expires.

Dropping the CBS broadcast community and NFL video games could be disastrous to AT&T, they usually might find yourself paying extra for Viacom channels by CBS, analysts have mentioned.

Dropping Viacom can even weaken AT&T’s leverage because it faces Walt Disney Co later this yr, in keeping with Mitchelson.

Shares of Viacom closed down 2.46 p.c at $25.34 on Friday whereas AT&T shares closed flat at $31.07.

Reporting by Kenneth Li, Helen Coster and Liana B. Baker; Modifying by Leslie Adler

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