/// AT&T in Talks to Acquire DirecTV

May 12, 2014  |  Media Week

DirecTV and AT&T are in talks to merge, with AT&T taking a stake in the smaller company in a deal composed of both cash and shares, according to multiple reports. Stock at both companies took a serious jump on the news; it's the most recent example of consolidation in the cable and telco industries and it's unlikely to be the last, especially if everything goes smoothly between Comcast and Time Warner Cable and the regulating bodies who have to sign off on that merger transaction. Indeed, things got a little simpler in the latter transaction today, as the TWC's divestiture of several cable systems—to competitor Charter, which is a condition of the merger—was combined with the docket to merge the two larger companies. Both DirecTV and AT&T declined to comment this evening, but reports, most prominently at The Wall Street Journal , say the deal could close within the next two weeks. AT&T would pay $50 billion in cash and stock for a majority stake in DirecTV. It's a proposition that would give AT&T a much larger stake in the cable industry, but its long-term implications are far-reaching and interesting: With a satellite cable provider as part of its suite of services, an Internet and telephone service provider like AT&T would have a major reason to start backing traditional TV against Netflix, Amazon, Hulu and the other streaming video services that make AT&T's service valuable but erode the marketability of a service like DirecTV. (It's true the the company has its U-Verse cable outfit, but that's available in fewer than 5 million homes across 22 states). If AT&T and DirecTV file with the regulators before Comcast, Time Warner and Charter complete the complicated docket that will be needed to finish that deal, it's possible that the agencies involved will want to look at both deals simultaneously, gumming up the works for all parties involved. It's also worth noting that AT&T's bid to take over T-Mobile was stifled by regulators in 2011. Mind you, though the specific parties are unexpected, consolidation in the cable industry is not. The U.S. pay-TV market has matured enough that its low end is occupied not by basic cable packages, but by streaming services including Netflix and the others listed above—and anyone offering traditional cable and satellite service is competing mostly for customers belonging to his competition. So rather than build out AT&T's fledgling U-Verse network or enter a bidding war for another geographically limited part of the market like TWC or Cox, AT&T is going for a satellite partner that will allow it to market over a much broader region. And it strengthens DirecTV's position as the rest of the industry huddles together.

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AT&T in Talks to Acquire DirecTV


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