Why AT&T's Entertainment Merger With Discovery Is a Win for Shareholders

When AT&T (NYSE: T) announced an agreement to merge its WarnerMedia entertainment division with cable network titan Discovery (NASDAQ: DISC.A) (NASDAQ: DISCK) on May 17, AT&T's stock sank. It continued to slide lower over the next six months and hovers near a 52-week low at the time of this writing.

The merger will see AT&T reduce its dividend, but that makes sense given the loss of the WarnerMedia division's revenue. In exchange, shareholders will receive stock in the new company, to be called Warner Bros. Discovery. In my view, this is a boon for shareholders.

Warner Bros. Discovery is positioned to experience years of growth, while the WarnerMedia spinoff allows AT&T investors to better evaluate the organization on its strong telco business. A look at WarnerMedia and Discovery illustrates the potential strength of the combined company.

Source Fool.com