AT&T and DirecTV, as part of a "unique" and perfect pairing, will be able to do together what no two other companies could, executives from both companies repeated Monday, May 19, during a press call to discuss the merger they announced via a press release the day before.
Together, the companies will have a tremendous opportunity to offer their wireless and mobile video capabilities in currently mostly untapped markets in Latin America and particularly Brazil; their scale will enable new cost benefits in the United States, including in regard to mobile content; and DirecTV's video delivery expertise will enable AT&T to offer mobile video on all the devices and in all the ways that customers are coming to expect it, from tablets to in cars and on airplanes.
"Video across all screens is going to be table stakes," said AT&T CEO Randall Stephenson, adding that DirecTV has the highest-level video subscribers in the industry and a "clear and elegant path" to HD video.
Among other compliments, he added that AT&T's new partner is a "very good, well-run company" with strong, consistent cash flow and considerable talent. And while DirecTV has "fantastic standalone mobile video capability," they lack the ability to bundle it into a complete package—but AT&T can.
"This is a very unique opportunity [for both companies], and this is going to very, very good for consumers," said Stephenson. "… We are convinced this is going to reinvent the mobile video opportunity."
The deal, which has a $48.5 billion equity value and a $67.1 billion transaction value (AT&T will pay $95 per share—$66.50 in ST&T stock and $28.60 in cash per share), comes on the heels of cable giant Comcast's announced $45 billion deal to buy Time Warner Cable. Both deals will require the approval of federal regulators.
Jan Dawson, principal analyst at Jackdaw Research, told eWEEK that regulators will need to consider the two deals together, to some extent, "because they involve turning the four largest TV/broadband/phone providers into a much larger big two."
DirecTV CEO Michael White said he welcomes a deep inspection of the deal.
"Together, we really exhaustively analyzed this … and we're excited to tell our story to the regulators in Washington," said White. "We've both spent a lot of time making sure we could get comfortable on the regulatory side. … We've had more economists than you could imagine [assess the deal]."
The two companies have been in talks about a deal for years. With the time and technologies finally right, White said, the opportunity he's most excited about is growth, particularly into rural areas.
"We have been salivating to do one bill, to not have to have two people show up at a customer's home over two days [to put services in place]," said White. "We couldn't have gotten [the benefits we'll see] from any other partner. This is an enormous opportunity for us."
In his opening remarks, White said the synergies between AT&T and DirecTV will "redefine how customers experience mobile entertainment."
The Rush to Streaming Mobile Video
Jackdaw's Dawson says that streaming mobile video is a challenge that all carriers will have to address, and some are currently trialing LTE Broadcast technology. While satellite offers AT&T an additional option in its arsenal (AT&T's Stephenson said that content will be deployed via a number of mediums), it's as-yet unclear how much of an edge AT&T will get from DirecTV.
"The bigger issue is getting the right to the content consumers care about," Dawson continued, noting that Verizon has the mobile right to mobile NFL, whereas DirecTV has the right to the NFL's Sunday Ticket. If Sunday Ticket isn't renewed (White said he's confident it will be by the end of the year), AT&T has the right to pull out of the deal.
Other types of content are also very fragmented, added Dawson, "so it's hard to see one single winner emerging from all this, just as no single winner has emerged in the wired [over the top] video space."
AT&T and DirecTV say that the benefits to customers will include a better experience and a stronger, more competitive alternative to cable; the convenience of a single provider for mobility, broadband and video; an increase in AT&T's broadband coverage area by 70 million homes; and the expansion of broadband to an additional 15 million rural households.
AT&T's current stand-alone broadband pricing will be guaranteed for three years, and DirecTV will continue to offer its stand-alone video packages at the same price, also for three years.
To help move the deal through the approval process in Latin America, AT&T will sell all of its shares of America Movil, the Mexico-based carrier owned by billionaire Carlos Slim.
When asked how Slim felt about the deal, Stephenson replied: "I've learned a lot from Carlos, and obviously we have spoken. He's a very dear friend, but now he will be a competitor, and we recognize that, and now off we go."