AT&T (NYSE: T) is unlikely to mount a serious bid for Yahoo, according to the financial analysts at Barclays. Thus, Verizon (NYSE: VZ) appears to remain the leading buyer for the internet company.
"We are hard pressed to see AT&T enter the Yahoo frenzy," wrote Barclays analysts in a research note this morning. "Recent reports from Bloomberg suggest that AT&T might be interested in Yahoo's Internet business. While it is premature to assume that AT&T is not interested, we find it hard to envision the carrier earnestly would move forward with a bid given it has its hands full integrating DTV, is participating in the broadcast spectrum auction and seems focused on asset optimization vs. augmentation."
The analysts said that, overall, an AT&T purchase of Yahoo would depend on several factors including the scalability of the deal in terms of subscribers, the content involved in the deal, the synergies available through the transaction, and the bidding price for Yahoo.
Bloomberg last month reported that AT&T had submitted a bid for Yahoo and remains active in the auction of Yahoo's core internet business. AT&T's interest in Yahoo puts the company directly into competition with Verizon, which is also reportedly bidding on Yahoo's business and reportedly remains the frontrunner.
Yahoo reportedly received roughly 10 offers ranging from $4 billion to $8 billion late last month for its core internet business, according to Bloomberg, in an auction of the company's business that remains ongoing. AT&T initially wasn't interested in Yahoo but has since submitted a bid for the company's business. Other bidders reportedly include entities backed by the likes of Warren Buffett and Bain Capital.
For its part, AT&T is working to integrate its $49 billion purchase of DirecTV. Later this year AT&T has promised to offer a refreshed DirecTV service that will be available across AT&T's networks as well as through the networks of its rivals.
But AT&T has shown a tentative interest in the kind of internet advertising that a Yahoo acquisition could bolster. The company announced last month the results of the cross-screen advertising trials its AdWorks business conducted with Opera Mediaworks. Walmart was one of the companies that participated in the trials, and it reported "a statistically significant lift in both brand and message favorability." The trials combined the advertising reach of AT&T's 13 million TV households with the 285 million mobile phones running Opera's advertising technology.
However, the Barclays analysts noted that the bidding for Yahoo stands as one of the few major potential transactions in the telecom industry. "The combination of a presidential election year and the current broadcast spectrum auction process has diminished the prospect for larger scale M&A activity across the U.S. telecom sector, in our view," the analysts wrote.
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