Tara Lachapelle is a Bloomberg Gadfly columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

Phew. Time Warner Inc.'s third-quarter results can provide some relief to AT&T Inc. investors as the wireless company gets closer to completing its $109 billion takeover of the TV-network owner. Then again, the bar is rather low.

Earnings at Time Warner, which owns HBO, CNN and Warner Bros. film studio, beat the highest analyst estimate as pay-TV subscription revenue managed to climb even in the face of cord-cutting. Time Warner also continued to have success at the box office with "Wonder Woman" and, most recently, "It."  

Holding Up
While Time Warner's advertising revenue has fallen some, this is being offset by a beneficial new cycle for affiliate fees, which is what its TV networks extract from distributors
Source: Bloomberg Intelligence

This may help AT&T shareholders shake off some last-minute jitters about the unusual pairing, which some still fear is an inauspicious sequel to the ill-advised AOL-Time Warner merger that had to be undone nearly eight years later. Given AT&T's struggle to add as many wireless subscribers as its rivals, along with its setbacks on the pay-TV side, I've been less bothered by the idea of it diversifying into entertainment content than the pile of debt it's taking on to do so.

This transaction looks a lot better so far than AT&T's 2015 purchase of DirecTV, though the satellite TV operator's issues seem to be flying under the radar given all the buzz around Time Warner. After all, there were expectations this summer that the Time Warner purchase would have closed by now, but it's still awaiting the nod from regulators.

Buyer's Remorse
Since AT&T bought DirecTV, the satellite-TV business is hemorrhaging customers, even as it entices some cord-cutters to subscribe to the cheaper DirecTV Now streaming service
Source: Bloomberg

AT&T bought DirecTV for $67 billion and it's not going so well. It lost 251,000 satellite customers last quarter, in addition to losing customers at U-Verse, AT&T's legacy pay-TV business. Even with the subscriber gains from DirecTV Now -- the company's new streaming service that runs much cheaper than traditional pay-TV and thus not that helpful to the bottom line -- AT&T's total net loss in pay-TV customers was 89,000. Ouch.

Alarmingly, Craig Moffett, a long-time industry analyst for MoffettNathanson LLC, said in a Bloomberg Radio interview Tuesday that DirecTV is now probably worth about half what AT&T paid for it. The stock is down 5 percent for the week.

So Much for Those Deals
AT&T has lagged behind its wireless peer group since striking its Time Warner deal a year ago. Only Dish Network, the biggest rival to its DirecTV satellite division, is doing as poorly:
Source: Bloomberg

A lot is riding on CEO Randall Stephenson's vision for bringing AT&T into the future and solidifying its customer base by spending big to add more services. As I mentioned, there's all the debt. And between the two companies there's about 280,000 employees and $280 billion of shareholder value at stake.

Can he pull it off, or is DirecTV a sign of more problems down the road? Some of us may be covering our eyes, but can't help peeking through our fingers.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net