Negotiations between Viacom and AT & T weigh on the possible rapprochement of the CSB: sources

(Reuters) – The bitter talks between Viacom Inc. and DirecTV over MTV, Nickelodeon and Comedy Central's power outage by midnight on Friday weigh in on a possible merger of CBS and Viacom, sources close to the talks said.

Although the boards of CBS and Viacom have not discussed the merger or decided to merge, these sources say they are currently studying the impact of AT & T on Viacom and its impact on motivation of the company to continue the merger of CBS. Viacom must resolve the AT & T contract before considering other strategic changes, including mergers and acquisitions, sources said.

Both companies are controlled by National Amusements Inc., of the Redstone family, which requested a merger last year but gave up ground, CBS exploring other options before deciding to go to Viacom.

Viacom would suffer a major financial blow without a contract with AT & T. AT & T is Viacom's largest distributor, with a total of 24.5 million video subscribers, and was responsible for approximately 15% Viacom's revenue for 2018. According to Wall Street estimates, the stake is about 2 billion dollars a year in fees and advertising.

The 2017 renewal of Viacom and Charter Communications Inc resulted in a 15% rate decrease. A similar result with AT & T could result in a $ 156 million decline in annual affiliate fees paid by AT & T to Viacom, although some badysts have estimated this decrease at about 10%.

Viacom and AT & T refused to comment. Negotiations continued Friday afternoon, sources said.

The inability to reach an agreement strengthens the position of CBS and Viacom's majority shareholder to bring the companies together to give them better leverage in future dealership negotiations.

"Viacom's clear need to have greater bargaining power after being abandoned by AT & T may be the last necessary factor to complete the CBS-Viacom speculative merger, given the common control of both. companies by National Amusements under Redstone's control, "Doug Mitchelson, an badyst at Credit Suisse said in a research note this week.

If AT & T and Viacom withdraw from the table, the position of the second US telecommunications company could also weaken, especially if it faces a combination of CBS and Viacom at the end of June, date of expiry of CBS contract with AT & T.

Abandoning the CBS broadcast network and NFL games would be disastrous for AT & T, which could end up paying more for Viacom channels via CBS, badysts said.

The loss of Viacom will also weaken AT & T's leverage against Walt Disney Co later this year, according to Mitchelson.

Shares of Viacom closed down 2.46 percent to 25.34 dollars on Friday, while those of AT & T stagnated at 31.07 dollars.