AT&T wants to take TV seriously. The company has announced plans to acquire satellite provider DirecTV, and if the deal is approved by regulators, the merged firms will control some 26 million TV subscribers. That would make it second only to the hypothetical 30 million accounted for by the Comcast-Time Warner Cable merger, which is still pending. The Wall Street Journal first reported that the boards of each company had approved the deal for a price of $95 a share — which values the satellite TV provider at $48.5 billion. In a press release, AT&T confirmed the news, adding that the acquisition will be a stock-and-cash deal.
Deal gives AT&T more opportunities to bundle services
The two companies already work together to bundle DirecTV with phone and internet from AT&T, and the opportunity of offering complete packages was likely a part of the appeal for the acquisition. AT&T currently has very limited TV service through U-verse, which is available in a limited number of states and covers roughly 5.7 million customers. Meanwhile, DirecTV has struggled as it, unlike cable companies, cannot make up for lost TV revenues by transitioning users to internet packages. AT&T notes in a press release that the acquisition will let the company "offer bundles that include video, high-speed broadband, and mobile services using all of its sales channels" including "AT&T’s 2,300 retail stores and thousands of authorized dealers."
In a statement, AT&T CEO Randall Stephenson noted that DirecTV "is a great fit" that offers "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."
The two companies have been in talks for some time, with rumors heating up in recent weeks before today's announcement. BuzzFeed first reported that the deal would be announced as early as Sunday. Previously, satellite TV competitor Dish Network expressed interest in a merger with DirecTV, but CEO Charlie Ergen called off talks after concluding that it was too expensive.
AT&T promises to abide by the FCC's net neutrality rules for three years if deal closes
AT&T is quick to note that the combined company will offer stiffer competition to entrenched cable companies. Additionally, as part of the deal, AT&T notes that it will agree to abide by the FCC's contentious 2010 net neutrality rules for at least three years after the date the deal closes. Currently, those rules are in limbo, and the move is certainly meant to help appease regulators and gain their favor to approve the deal. The company also says it will expand broadband service in 15 million — mostly rural — locations where it does not currently offer service today.
While both companies are primarily involved in US services, DirecTV has a large presence in Latin America — it's the largest pay TV provider in the region, with 18 million customers.
The two companies are planning to hold a conference call on Monday morning to answer questions about the deal — we'll have much more then.