Following today’s news that AT&T’s WarnerMedia and Discovery will combine operations to create a standalone entertainment company;

Tammy Parker, Senior Analyst at GlobalData, a leading data and analytics company, offers her view:

“Current AT&T CEO, John Stankey, is making the correct moves to refocus AT&T. He has spent the past year wisely unraveling deals that were previously made under the misbegotten vision of turning AT&T into an entertainment company. The costly distractions caused by venturing onto that path constrained AT&T’s ability to invest in its core telecommunications business, at a time when it needs to be building up its 5G and fiber broadband services to remain competitive.

“Obviously AT&T is not the only telco to stumble after getting caught up in the content-bundling frenzy that marked the waning years of the last decade. Verizon’s deal to shed majority control of Verizon Media, created from its acquisitions of AOL and Yahoo, and T-Mobile’s shutting down of TVision, built upon the assets of its Layer3 TV acquisition, also represent failed gambles made in the name of service diversification and a desire to expand outside the core, but stodgy, telco sector. The companies have learned a tough lesson that focusing on their core competencies allows them to grow and prosper, while still leaving room to partner with pure-play content companies.

“Combining Discovery and WarnerMedia content assets will create a merged operation with considerable scale that is better positioned to take on the likes of Netflix and Disney. This win-win, horizontal merger will create a stronger competitor, but it would have made more sense for Time Warner and Discovery to go down this path together several years ago before AT&T acquired Time Warner.

“We don’t know how services such as HBO Max and Discovery+ ultimately will or will not be combined in the direct-to-consumer streaming world, but it’s a fair guess to say that Verizon will be rethinking its decision to bundle Discovery+ for free with certain of its wireless service plans.”