AT&T Receives FCC Approval on DirecTV Acquisition

Under the FCC approval, AT&T has to meet several conditions, including offering broadband to low-income customers at discounted prices.

AT&T, DirecTV, merger, broadband, satellite TV, FCC

AT&T's $48.5 billion proposal to acquire satellite-TV provider DirecTV today received Federal Communications Commission approval, causing AT&T to quickly announce the closing of the deal it's been awaiting since May 2014.

"Combining DirecTV with AT&T is all about giving customers more choices for great video entertainment integrated with mobile and high-speed Internet service," Randall Stephenson, AT&T chairman and CEO, said in a statement. "We'll now be able to meet consumers' future entertainment preferences, whether they want traditional TV service with premier programming, their favorite content on a mobile device, or video streamed over the Internet to any screen."

The now-approved acquisition allows AT&T "to significantly expand our high-speed Internet service to reach millions more households, which is a perfect complement to our coast-to-coast TV and mobile coverage," Stephenson continued. "We're now a fundamentally different company with a diversified set of capabilities and businesses that set us apart from the competition."

The closing of the merger was made possible after the FCC announced late on July 24 that its members voted to approve the transaction under several conditions, including that AT&T expand its deployment of high-speed, fiber-optic broadband Internet access service to 12.5 million customer locations, as well as provide lower rates for services to schools and libraries, according to the FCC. AT&T and its DirecTV unit are also prohibited from using discriminatory practices to harm online video distribution services and must submit so-called Internet interconnection agreements to the FCC for review under the approval. Finally, the company will also be required to offer discounted broadband services to low-income consumers under the terms of the FCC's approval. The conditions for the deal are in effect for four years.

"The conditions imposed by the Commission address potential harms presented by the
combination of AT&T, one of the nation's largest telephone and Internet service providers, and
DirecTV, the nation's largest satellite video provider," the FCC said in a statement. "The conditions also ensure that the benefits of the merger will be realized."

The completed acquisition means that AT&T is now the largest pay TV provider in the United States and the world, servicing more than 26 million customers in the United States and more than 19 million customers in Latin America, including Mexico and the Caribbean, according to the company. AT&T also says it has more than 132 million wireless subscribers and connections in the United States and Mexico, while offering 4G LTE mobile coverage to almost 310 million people in the United States.

The integration of the two merged companies will occur over the coming months, and customers won't have to take any actions as a result of the transaction, the company announced. "In the coming weeks, AT&T will launch new integrated TV, mobile and high-speed Internet offers that give customers greater value and convenience," the company said.

Leading the combined DirecTV and AT&T Home Solutions operations will be John Stankey, who will report to Stephenson, while DirecTV president, chairman and CEO Mike White is retiring and leaving the company.

Under the terms of the merger, DirecTV shareholders are receiving 1.892 shares of AT&T common stock, in addition to $28.50 in cash, per share of DirecTV.

AT&T is also required to appoint a company compliance officer to develop and implement a plan to ensure compliance with the FCC's merger conditions. It will also have to hire an independent, third-party compliance officer to evaluate the plan and its implementation, and submit periodic reports to the FCC.

The proposed AT&T acquisition of DirecTV took a big step forward on July 22, when FCC Chairman Tom Wheeler issued his recommendation that the commission vote to approve the deal, which has been under review since it was first raised in May 2014, according to an earlier eWEEK report. The Department of Justice has previously said that it does not see potential antitrust law violations in an AT&T-DirecTV merger and does not plan to oppose it. This means that the FCC's approval was the last major legal requirement for the deal.