AT&T Reportedly Considering DirecTV Merger

 
 
By Michelle Maisto  |  Posted 2014-05-01 Email Print this article Print
 
 
 
 
 
 
 

Comcast's bid for Time Warner Cable has AT&T eyeing DirecTV, says the Journal. The potential new companies would have near-equal heft.

AT&T has approached satellite-TV company DirecTV about the possibility of an acquisition, the Wall Street Journal reported May 1.

Such a deal would put the combined company—AT&T's nearly 6 million television customers and DirecTV's 20 million—in a position to compete against a combined Comcast and Time Warner Cable (TWC), which would have nearly 30 million subscribers.

On Feb. 13, Comcast announced its hope to purchase TWC for $45.2 billion in stock, pending regulatory approval. That deal, said the Journal, encouraged AT&T to consider its own pay-TV deal.

AT&T already offers pay-TV services (along with Internet access and phone services) as part of its U-verse business, and more recently it has begun expanding its U-verse with GigaPower services, via an "ultra-fast fiber network" capable of downloading a TV show in just 3 seconds.

AT&T's focus, along with its customers', has increasingly shifted toward video.

AT&T CEO Randall Stephenson, speaking at a Morgan Stanley conference March 9, said he has been paying close attention to the Comcast deal and expects it to be approved.

"It creates an impressive business. In fact, it's a business that's going to cover 80 percent of the households in the U.S. … and it's going to be vertically integrated with content," said Stephenson.

He added that AT&T is delighted with the results of its fiber investments, and that it plans to be "more aggressive and assertive," in light of its new competitors.

An Evolving Tech Landscape

The possibility of companies such as AT&T and DirecTV coming together and AT&T's increasing focus on fiber—alongside Google's move into fiber—are examples of the "dramatically" changing media and communications industry that Comcast and TWC pointed to, defending their proposed merger before a U.S. Senate Committee April 10.

"A host of sophisticated companies with national and even global footprints, like AT&T, Verizon, DirecTV, Dish, Amazon, Apple, Sony, Google, Netflix and Facebook, are increasingly competing against one another for customer attention and loyalty," the cable companies said in their submitted written statement before the meeting.

"New digital platform providers, with their roots in software and hardware, are using the robust Internet connectivity provided by Comcast, TWC and our competitors to grow into global powerhouses," they added. "These companies are increasingly pursuing new businesses that compete with ours."

In an effort to encourage the deal forward, Comcast on April 28 announced a deal with Charter Communications, in which it will divest nearly 4 million subscribers—selling 1.4 million to Charter and divesting another 2.5 million to a new publicly traded company that Charter would run—should the merger with TWC receive approval.

T-Mobile CEO John Legere, during the company's May 1 earnings call, addressed the matter of "consolidation"—though not rumors that Sprint may soon make a formal bid to buy T-Mobile—saying that the scale and capital it creates is a way to "close the gap on the big guys."

He also said he wasn't just talking about the four Tier 1 wireless carriers. "There are … tangential players that are sitting on the periphery of the industry looking in who may want to play, and multiple players that are not seen, whether it's the cable industry [or others]," he said.

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