AT&T Could Buy DirecTV to Become the Second-Biggest Media Provider, After Comcast/TWC
This spring is officially the season for mega-mergers. As T-Mobile looks to take over Sprint and cable-giant Comcast tries to convince the public that merging with the country's second-largest cable provider, Time Warner Cable, would be a good thing, AT&T has reportedly approached DirecTV about a possible buy-out.
AT&T has reached out to DirecTV about possibly acquiring the satellite-TV company, according to unnamed sources as first reported by The Wall Street Journal. The acquisition would be the third in a line of major shifts this year in what is becoming an increasingly turbulent TV/Internet-industry landscape, after the proposed Sprint/T-Mobile and Comcast/TWC mergers.
As the WSJ noted, a combined AT&T-and-DirecTV corporation would be close to the size of the cable behemoth that the Comcast/TWC merger would create; DirecTV is actually the second-biggest pay TV operator in the country with 20 million subscribers. Added with AT&T's nearly 6 million TV customers, the new television company would have close to the 30 million TV subscriber-base that the merged Comcast/TWC would have, after its legally required divestment of nearly 4 million customers, which is planned to go to Charter Communications. In fact, it would rank as the second-largest media deliver conglomeration behind Comcast/TWC. Both AT&T and DirecTV declined to comment to the WSJ on the matter.
If approved and successful, AT&T's buyout of DirecTV would give it better access to customers across the country, since DirecTV generally isn't limited by region like cable companies. For example, AT&T would be able to offer customers new bundles that would include satellite TV service and wireless (cellular) and/or DSL in places they don't have access to fiber.
AT&T has reportedly tried courting other media services before though, with no success, according to CNN's Brian Stelter. Previous attempts include DISH Network (which has considered its own merger with DirecTV) and British telecom Vodafone, leading industry analyst Craig Moffett to look skeptically at the possible deal. "It feels to me like strategy by process of elimination ... That is usually a terrible way to build a company," wrote Moffett to Stelter.
An additional reason for doubting the seriousness of the ostensible merger is that AT&T has previously held similar talks with DirecTV, though now that the satellite TV service has seen a loss of subscribers in recent years, it might be more open to the acquisition.
Though the company hasn't acknowledged any possible deal, AT&T certainly is not afraid of big media mergers -- even that of competitors. While some companies like Netflix, Charter Communications, and most recently Univision have expressed doubts or outright opposition to the Comcast/TWC merger, Stelter notes that AT&T's CEO Randall Stephenson has enthusiastically called the move "a blockbuster deal," and an "industry redefining deal from our standpoint [that] creates an impressive business."
Any acquisition deal will be evaluated by the Department of Justice and Federal Communications Commission for anti-competitiveness, but the combined AT&T/DirecTV may actually increase competition in the TV/internet marketplace -- if the Comcast/TWC merger is approved. For consumers -- whether that's the ideal situation or just making the best of an unwelcome state of affairs -- is still up in the air.
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