AT&T and DIRECTV Merger Approved
Federal regulators have signed off on the proposed merger between DIRECTV and AT&T, a deal that creates the largest pay-TV service in the United States and the world.
Although specific details about new offers and features have yet to be announced, AT&T’s CEO has predicted that the realigned company would look to start providing “robust video offerings” within 12 to 18 months of the merger’s approval.
“Combining DIRECTV with AT&T is all about giving customers more choices for great video entertainment integrated with mobile and high-speed Internet service,” said AT&T CEO Randall Stephenson after the merger was finalized. “We’ll now be able to meet consumers’ future entertainment preferences, whether they want traditional TV service with premier programming, their favorite content on a mobile device, or video streamed over the Internet to any screen.”
The Federal Communications Commission (FCC) gave the merger its OK on July 24, with the Department of Justice having completed its own review earlier. The FCC’s stamp of approval represents the final step in the federal review process, which began after the companies announced the merger plan in May 2014.
The merger provides AT&T with more capacity to offer bundled TV, Internet and telephone services. As standard procedure with deals of this size and scope, government regulators scrutinized the proposal to ensure that it complies with antitrust regulations and upholds consumer protections. Approval from the FCC and the Department of Justice indicates that the companies addressed those concerns to the government’s satisfaction.
DIRECTV and AT&T: The Deal at a Glance
- AT&T acquires DIRECTV for $48.5 billion and assumes DIRECTV’s net debt of $18.6 billion, giving the merger an overall value of $67.1 billion. It ranks as the biggest acquisition in the communications industry since Verizon spent $130 billion to take complete control of Verizon Wireless in 2013.
- Combining DIRECTV’s 20.3 million U.S. customers with AT&T’s 5.7 million U-verse video customers will result in a total of 26 million video subscribers.
- The merger is expected to expand the AT&T broadband network to a coverage area of 70 million customer locations.
What Can Consumers Expect?
- Combining DIRECTV’s satellite TV service with AT&T’s mobile and wireless capabilities will give customers the ability to enjoy more premium entertainment content on more screens and more devices.
- DIRECTV service is expected to remain available for at least three years once the merger is complete. During that time, nationwide packages and pricing will still apply.
- Between them, the two companies offer a list of services that includes video, high-speed Internet, voice, wireless and home security/automation. The merger offers increased potential for bundles that would allow customers to streamline multiple services into one account.
- Executives from DIRECTV and AT&T predict that with the companies’ combined buying power and market share, programming disputes that sometimes cause “blackouts” will be less likely. The larger customer base would provide better leverage for negotiating with content providers.
Why This Merger Succeeded
In April, Comcast executives heeded the signals they were getting from regulators and ended their bid to merge with Time Warner Cable. Industry experts say that the government’s main concern about a union of the two cable TV giants involved high-speed Internet, not TV service.
The combination of Time Warner Cable and Comcast would have given one company control of more than half of the country’s broadband customers. By contrast, the AT&T-DIRECTV merger is seen primarily as a vehicle for AT&T to expand its presence in the pay-TV industry, where increased competition and new technologies have reduced the threat of monopolies.
DIRECTV is America’s #1 satellite television service, with 20.3 million U.S. customers and 18 million additional customers in Latin America. Headquartered in El Segundo, Calif., DIRECTV was founded in 1990 and reached the milestone of 15 million customers in 2005. Company stock is traded on the NADAQ Exchange under the ticker symbol DTV.
As one of the world’s largest communications providers, AT&T provides voice, high-speed Internet, wireless and other services to customers in more than 210 countries. The company, headquartered in Dallas, traces its roots to 1876 with Alexander Graham Bell’s invention of the telephone. AT&T stock is listed on the New York Stock Exchange under the ticker symbol T.