AT&T has announced plans to purchase satellite-TV provider DirecTV for $48.5 billion.
Following rumors that such a deal was in the works, AT&T announced Sunday, May 18, that it had reached a deal to acquire DirecTV for $95 per share, based on AT&T’s Friday closing price. The deal has been approved by the boards of both companies.
At a time when smartphone sales growth is slowing and wireless carriers, AT&T in particular, are working to diversify their revenue opportunities, the deal would make AT&T one of nation’s largest pay-TV providers, adding DirecTV’s 20 million subscribers to its own 6 million.
However, AT&T’s mobile network and high-speed broadband network, plus the broadband expansion enabled by the transaction, will ultimately cover 70 million customer locations, DirecTV said in a statement.
“This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens—mobile devices, TVs, laptops, cars and even airplanes. At the same time, it creates immediate and long-term value for our shareholders,” Randall Stephenson, AT&T chairman and CEO, said in a statement (sounding not a little bit like Dish CEO Charlie Ergen last spring, when he tried to merge that satellite TV provider with Sprint).
“DIRECTV is the best option for us because they have the premier brand in pay TV, the best content relationships, and a fast-growing Latin American business,” Stephenson continued. “DIRECTV is a great fit with AT&T and together we’ll be able to enhance innovation and provide customers new competitive choices for what they want in mobile, video and broadband services.”
Stephenson, speaking at a Morgan Stanley conference March 9, said he was paying close attention to Comcast’s $45 billion bid to buy Time Warner Cable (TWC). Stephen noted that the deal would cover 80 percent of households and create “an impressive business.”
A Comcast-TWC merger would have 30 million subscribers, making it the only cable provider larger than AT&T and DirecTV would be.
Like the Comcast-TWC deal, an AT&T-DirecTV deal will face fierce scrutiny from regulators.
Comcast and TWC have already begun the process of trying to convince the government of the merits of their deal. They filed a 181-page application with the Federal Communications Commission April 8 and presented their position before the U.S. Senate Judiciary Committee April 9.
The deal, executives with Comcast and TWC said in a joint statement, would give them the scale they need to compete an in a “competitive ecosystem” in which “AT&T, Verizon, DirecTV, Dish” and other companies with global footprints, “are competing with each other and with us in unprecedented ways.”
John Bergmayer, senior staff attorney with consumer advocacy group Public Knowledge, responded to the AT&T announcement by saying the industry “needs more competition, not more mergers.”
He added that Public Knowledge will further analyze the proposal for “potential harms” to the video programming and wireless markets and hopes to hear more definitive information about what the companies have planned.
“For example, does AT&T plan to frame this as allowing it to compete more effectively with Comcast?” asked Bergmayer. “If so, that is yet another reason why policymakers should be skeptical of the pending Comcast/Time Warner Cable transaction. We also need to know more about whether AT&T plans to offer some kind of wireless/pay TV bundle, and what kinds of services it could offer in both U-Verse territories and nationwide. Policymakers will have to ask a lot of tough questions when looking at this deal.”
AT&T and DirecTV will hold a press conference on the deal Monday, May 19, at 8:30 a.m. Eastern Time.