NEW YORK • AT&T has reached an in-principle agreement to buy Time Warner for about US$85 billion (S$118 billion), sources have said, paving the way for what would be the biggest deal in the world this year, giving the telecoms company control of cable TV channels HBO and CNN, film studio Warner Bros and other coveted media assets.

The deal, which has been agreed on most terms and could be announced as early as today, would be one of the largest in recent years in the sector as telecommunications companies look to combine content and distribution to capture customers replacing traditional pay-TV packages with more streamlined offerings and online delivery.

AT&T, which sells wireless phone and broadband services, has already made moves to turn itself into a media powerhouse, buying satellite TV provider DirecTV last year for US$48.5 billion.

It also in 2014 entered a joint venture, Otter Media, with the Chernin Group to invest in media businesses, and has rolled out video streaming services.

AT&T will pay US$110 per Time Warner share in cash and stock, or about US$85 billion overall, sources told Reuters.

It will need to line up financing to pay for the deal, since it has only US$7.2 billion in cash on hand. This could put pressure on its credit rating as it already has US$120 billion in net debt as of June 30, according to Moody's.

Time Warner, a major force in movies, television and video games, saw its shares rise almost 8 per cent in regular trading in New York, and a further 3.4 per cent after hours, to US$92.50, giving it a market value of about US$73 billion.

AT&T closed down 3 per cent at US$37.49.

REUTERS