The deal is expected to close by the end of 2017, pending regulatory approval. It will give AT&T control of Time Warner's powerful content houses -- not least CNN, HBO, DC Comics, Warner Bros, Cartoon Network, and more.
AT&T said the combined company will strive to become the first US mobile provider to compete nationwide with cable companies with bundled mobile broadband and video.
The telco added the deal will bring new forms of original content built for mobile and social.
"This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers," Randall Stephenson, AT&T chairman and CEO, wrote in a statement. "Premium content always wins. It has been true on the big screen, the TV screen and now it's proving true on the mobile screen. We'll have the world's best premium content with the networks to deliver it to every screen."
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Time Warner shareholders will receive $107.50 per share under the terms of the merger, comprised of $53.75 per share in cash and $53.75 per share in AT&T stock. The cash portion of the purchase price will be financed with new debt and cash on AT&T's balance sheet.
In 2015, AT&T acquired DirecTV for $49 billion to become the nation's largest pay-TV subscriber.
With its massive Time Warner acquisition, AT&T could be laying the ground work for a massive over-the-top video service like Netflix, as it's teased the launch of an online-focused DirecTV Now service.
Not only will AT&T own the network you use to watch video, it will also own the content itself.
"This is a great day for Time Warner and its shareholders. Combining with AT&T dramatically accelerates our ability to deliver our great brands and premium content to consumers on a multiplatform basis and to capitalize on the tremendous opportunities created by the growing demand for video content," Time Warner Chairman and CEO Jeff Bewkes wrote in a statement. "That's been one of our most important strategic priorities and we're already making great progress -- both in partnership with our distributors, and on our own by connecting directly with consumers."
But time will tell if regulators will approve the massive deal.
In 2011, cable provider Comcast gained a $37 billion controlling stake in content house NBC Universal, and it was approved by the FCC in roughly two years.
The Free Press organization criticized the proposed AT&T and Time Warner merger. Free Press Policy Director Matt Wood wrote on Saturday:
"Any time you hear media executives talking about synergies, throwing around the business-babble that always accompanies these rumors, you know it's time grab your wallet and hang on tight," Free Press Policy Director Matt Wood wrote on Saturday."Big mergers like this inevitably mean higher prices for real people, to pay down the money borrowed to finance these deals and their golden parachutes. The deals are driven by Wall Street's insatiable desire for short term growth at any cost. And just as AT&T's recent purchase of DirecTV was quickly followed by price hikes, there's every reason to expect this potential tie-up would cost internet users and TV viewers dearly too.
In addition to announcing the Time Warner deal, AT&T released its third-quarter earnings results. AT&T reported earnings of $0.54 per share and revenue of $40.9 billion. Operating income was up 8.2 percent on year, and AT&T's wireless business added 1.3 million net subscribers in the US.
AT&T said the 4.6 percent increase in revenue was "primarily due to DirecTV."