AT&T to Acquire DirecTV for $48.5B

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Spurred to act by Comcast’s pending acquisition of Time Warner Cable, AT&T plans to buy satellite TV leader DirecTV for about $48.5 billon.


The deal between AT&T Inc. (NYSE: T) and DirecTV Group Inc. (NYSE: DTV), first reported two weeks ago by the Wall Street Journal and announced publicly by the two companies late Sunday afternoon, would transform the landscape for video, broadband, cable, telecom, and wireless services in the Americas. That would be particularly true in the US, where the union of the nation’s largest telco and satellite TV provider would produce a monolith with nearly 26 million video and 17 million broadband subscribers, as well as 16 million residential phone lines and close to 100 million wireless customers. (See Broadnet Gets 400G-Ready With Huawei and AT&T Eyeing a Bid for DirecTV?)


The combination would also create a far more powerful rival to Comcast Corp. (Nasdaq: CMCSA, CMCSK), which is pursuing its own visions of grandeur by buying Time Warner Cable Inc. (NYSE: TWC) for more than $45 billion. The new Comcast would wind up with about 29 million video, 28 million broadband, and 13 million wireline voice subscribers, assuming that the deal is approved by federal regulators and it follows through on its planned divestitures to and system swaps with Charter Communications Inc. .


Further, AT&T doesn’t plan to stop there. In the merger announcement by the two companies, AT&T said it will “expand its plans to build and enhance high-speed broadband service to 15 million customer locations” over the next four years. The new commitment would be above and beyond the company’s existing fiber and Project VIP initiatives.


The carrier said it also intends to pursue more wireless spectrum in the upcoming federal auctions this year and next. It stressed that it aims to “bid at least $9 billion in connection with the 2015 incentive auction,” as long as there’s sufficient spectrum available to provide it “a viable path to at least a 2×10 MHz nationwide spectrum footprint.”


Clearly seeking to appease federal regulators who must approve the blockbuster deal, AT&T pledged that it will offer “standalone wireline broadband speeds of at least 6 Mbit/s (where feasible)” in areas where it already offers broadband at “guaranteed prices for three years after closing.” In addition, the carrier vowed to maintain its commitment to the Federal Communications Commission (FCC) ‘s net neutrality policies for three years after closing the deal, even if the Commission fails to re-impose those rules. Moreover, AT&T said it will keep up DirecTV’s nationwide package pricing for at least three more years.

If both AT&T and Comcast succeed in completing their proposed acquisitions, the US broadband, telecom, and pay TV landscape would be dominated by two huge national or virtually national companies — the new AT&T and the new Comcast. Between them, the two giants would easily control more than half of the pay TV and broadband markets, as well as nearly half of the wireline voice market and a sizable chunk of the wireless market.


On its own, the combined AT&T-DirecTV would also maintain DirecTV’s status as the largest pay TV provider in Latin America, with more than 18 million satellite TV subscribers in Mexico, Argentina, Brazil, and elsewhere.


Like the Comcast-Time Warner Cable deal, the AT&T-DirecTV pact will be subject to stiff regulatory scrutiny by both the Antitrust Division of the U.S. Department of Justice and the FCC. Both federal agencies are already gearing up to scrutinize the proposed Comcast-TWC union, making for an extremely busy summer and fall.


— Alan Breznick, Cable/Video Practice Leader, Light Reading

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