AT&T is mulling a $40 billion acquisition of DirecTV

By Mike Flacy April 30, 2014

at-t — Image used with permission by copyright holder

Explained in a report published by the Wall Street Journal recently, AT&T representatives have approached DirecTV executives about a potential acquisition offer that would merge the two companies. Potentially costing AT&T a minimum of $40 billion, DirecTV’s 20 million subscribers would be merged with AT&T’s 5.7 million U-Verse TV subscribers. Assuming the Comcast acquisition of Time Warner Cable is approved, that would move AT&T into the second place position trailing the Comcast / Time Warner Cable 30 million subscriber combination by approximately 4 million subscribers.

It’s highly likely that DirecTV would be open to such a deal since previous reports indicated that DirecTV was considering a merger with Dish Network. However, merging with AT&T could be more advantageous since the companies could bundle DirecTV’s satellite television service with high speed Internet service provided by AT&T. That’s a competitive advantage that satellite television companies have failed to match, thus some subscribers have likely moved to cable in order to bundle services together for a lower overall cost each month.

Interestingly, AT&T already has an ongoing partnership with DirecTV that bundles the satellite service in areas where U-Verse TV isn’t available. From AT&T’s perspective, a merger could provide a more impressive video delivery system for mobile users. It would also provide the company with a much larger reach in the pay-TV market, an industry that’s arguably reached maturity.

Identical to the Comcast acquisition of Time Warner Cable, a deal between AT&T and DirecTV would be under scrutiny of the Department of Justice as well as the Federal Communications Commission. The two companies will have to prove that the merger is in the best public interest and would be able to provide more effective competition together against other media companies. This merger could also encourage Dish Network to partner with a company similar to AT&T, basically an attempt to keep up with the competition.

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