Senior executives of telecommunications company AT&T Inc (T.N) and media conglomerate Time Warner Inc (TWX.N) have discussed various business strategies including a possible merger in recent weeks, Bloomberg reported on Thursday, citing people it said were familiar with the matter.
A deal would be one of the largest in recent years in the sector as telecom companies make a land grab for media firms in order to get hold of valuable content.
Time Warner shares jumped 4.7 percent in regular trading and slightly extended gains after hours. AT&T shares slipped 1.8 percent.
Neither side has yet hired a financial adviser, Bloomberg said. (bloom.bg/2enqBF9)
AT&T and Time Warner declined to comment.
Time Warner is attractive because of its premium cable channel HBO, the CNN news network, film studio Warner Bros and other media assets.
AT&T, which sells wireless phone and broadband services, may be looking to emulate cable company Comcast Corp (CMCSA.O), which acquired NBCUniversal and DreamWorks Animation in a bid to become a massive force that controls how television shows and movies are made and how they are delivered to viewers.
Owning more content gives cable and telecom companies more leverage as customers demand smaller, hand-picked cable offerings or are cutting the cord altogether and watching online.
AT&T has already made moves to turn itself into a media powerhouse, buying satellite TV provider DIRECTV last year for $48.5 billion.
Time Warner Chief Executive Jeff Bewkes has not been willing to sell in the past. The company rejected an $80 billion offer from Twenty-First Century Fox Inc (FOXA.O) in 2014.
While Bewkes, 64, was not open to a deal two years ago, the pace of consolidation in the media sector may urge him to reconsider, especially as two competitors, Viacom Inc (VIAB.O) and CBS Corp (CBS.N) have been exploring a potential merger at the request of controlling shareholder Sumner Redstone.
Talk of a deal comes as another potential bidder, Verizon Communications Inc (VZ.N), is busy with its purchase of internet company Yahoo Inc (YHOO.O), which has been set back by news of a massive hacking breach into Yahoo customers’ email accounts.
Time Warner has a market value of about $65 billion. AT&T has a market value of about $238 billion.
Any merger of that size in a sensitive market would get a close look from regulators, analysts said, but that would not necessarily derail a deal.
“Whoever the next president’s pick for the Federal Communications Commission is will have a significant say,” said Recon Analytics analyst Roger Entner.
Entner said Comcast’s purchase of NBCUniversal set a precedent and there is “a strong argument to say the FCC should approve” a deal between AT&T and Time Warner.