E Davies, RR is a major factor why AT&T wanted UMG. If it were not for RR, AT&T wouldn't risk Comcast's anger to bid for UMG. AT&T could buy Cox instead. There are very important reasons for AT&T to buy UMG.
First, by buying UMG, AT&T can avoid a coup by Comcast to form a big competitive alliance of Comcast/UMG/RR/TWX. This alliance maybe too threatening to AT&T's long term interest. Without UMG, and with 35% of RR in AT&T's hand, such alliance will become impossible. Secondly, owning a big stake in RR at least give AT&T a strong leverage to control the future of RR.
Without UMG, AT&T will lose all control of RR. Armstrong may not want to merge RR and ATHM immediately because of regulatory concern, but with UMG, T now has the power to control RR. At least, T can make sure that Comcast or TWX will not be able to endanger T's long term interest. AT&T wins by reducing Road Runner from a possible hostile competitor to a benign competitor to AT&T's main brand, @Home.
So, T must own UMG, that is critical.
One thing I don't understand is, why T didn't buy UMG earlier? Why wait till Comcast's deal? Did Comcast's move woke T up for this bad possible of a coup by Comcast?
I must give credit to Ahhaha on this: He was correct in saying that Comcast intended to get out of AT&T's control. This was a strong possibility. |
