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Purchase of DirecTV To Make AT&T Major Player in Video
Purchase of DirecTV To Make AT&T Major Player in Video

By Jennifer LeClaire
May 19, 2014 10:02AM

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"Investors always want to see growth," said analyst Jeff Kagan of the AT&T deal to buy DirecTV. "This is one more way AT&T can show growth going forward. This will also let AT&T compete on a nationwide scale rather than just in its region and allow the company to offer a larger combination of satellite TV, IPTV, Internet, voice and wireless."
 


In a move to become a major player on the video front, AT&T is spending $48.5 billion for DirecTV, a satellite TV provider that delivers video on any device. Combined with AT&T's broadband network that covers 70 million customer locations, the blockbuster acquisition would create a powerhouse in mobility, video and broadband services.

Consider the breadth of the merged company, which hints at a converged future. If the deal is approved by federal regulators, AT&T will become a content distribution leader across mobile, video and broadband platforms. The scale will position AT&T to meet customer viewing demands today and in the future, spanning traditional pay TV, on-demand video services delivered over broadband, or a combination of the two. Expect a massive shake up in AT&T bundles when the deal closes.

"This is 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," said Randall Stephenson, AT&T chairman and CEO. "At the same time, it creates immediate and long-term value for our shareholders."

Forward-Thinking Merger

As Stephenson sees it, DirecTV was AT&T's best option because it is a premier brand in pay TV with strong content relationships and a fast-growing Latin American business. He's convinced the merged company can drive innovation and offer more competitive choices for customers. Mike White, president and CEO of DirecTV, agreed.

"U.S. consumers will have access to a more competitive bundle; shareholders will benefit from the enhanced value of the combined company; and employees will have the advantage of being part of a stronger, more competitive company, well positioned to meet the evolving video and broadband needs of the 21st century marketplace," White said.

One differentiator DirecTV brings to AT&T's table is live sports programming. It has the exclusive pay TV rights to NFL Sunday Ticket, which provides every out-of-market game, on TV, laptops and mobile devices every Sunday afternoon. DirecTV's content ownership includes Root Sports Network and minority stakes in the Game Show Network, MLB Network, NHL Network and the Sundance Channel.

What the Future Holds

Jeff Kagan, an independent technology analyst, said there was still plenty to learn about the deal, but so far it sounded like a smart move for AT&T because it would help the company continue growing in new ways that would keep investors, partners, and customers happy.

"Investors always want to see growth. This is one more way AT&T can show growth going forward," Kagan told us. "This will also let AT&T compete on a nationwide scale rather than just in its region and allow the company to offer a larger combination of satellite TV, IPTV, Internet, voice and wireless."

Kagan remembers the 1990s, when there were lots of small telecom companies. Since then, the industry has seen merger after merger after merger as the marketplace changed. The mergers continue, even though there are just a few large companies today.

"Tomorrow we will see even fewer competitors on a nationwide scale. We will also see unlike companies merge, creating newer and more powerful kinds of competitors," Kagan said. "I think the timing of this merger makes sense with the Comcast and Time Warner Cable merger on the table. I think either they will both be approved or denied."
 

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