AT&T has reached an agreement in principle to buy Time Warner for $85bn - report

Telecommunications giant AT&T is said to have agreed in principle to acquire Time Warner for about $85bn (£69.49bn). This could be announced as early as Sunday, according to unnamed sources.

In law, an agreement in principle is a stepping stone to a contract. They are usually considered fair and equitable. While it will not include all details, it could outline a few such as a schedule of royalties.

The sources further said that AT&T and Time Warner, the American media and entertainment conglomerate, had agreed on most terms of the potential deal. It is said that AT&T is valuing Time Warner at $110 per share, which takes the deal value to the said $85bn.

Payment will be made in both cash and AT&T stock, the source added. AT&T, which sells wireless phone and broadband services, will need to raise capital in order to finance this deal. This is because it only has $7.2bn in cash on hand.

This is not the first time that AT&T has eyed the entertainment space. In 2015 it had acquired a US direct broadcast satellite provider called DirecTV for $48.5bn. It had also in 2014 entered into a joint venture with media holding company, the Chernin Group. This JV, called Otter Media, which invests in various media businesses, has also rolled out video streaming services, according to Reuters.

Amy Yong, an analyst with Macquarie Securities said that AT&T would benefit by acquiring Time Warner, which owns content that ranges from Game Of Thrones and Batman films to the rights to NBA basketball games.

She was cited by the Financial Times as saying that the deal would give AT&T exclusive content that would "help its competitive positioning" against wireless telephony rivals such as Verizon and Sprint. Yong added that the combined company could also give a tough fight to digital video streaming companies such as Netflix and Hulu.

For Time Warner, this is not the first takeover bid it has received. In 2014, Twenty-First Century Fox had offered $80bn for it. The entertainment company's chief executive Jeff Bewkes had, however, then rejected the offer. It was also reported by a few news reports that tech giant Apple too had approached Time Warner with regards to a merger, just a few months ago.

The current AT&T — Time Warner news has had an impact on the share prices of both the companies. While the news led to a 3% fall in AT&T's share price to $37.49 on the New York Stock Exchange on Friday, Time Warner's shares increased 7.8% to $89.48.