AT&T in Talks to Buy DIRECTV - Analyst Blog

Leading wireless provider, AT&T, Inc. T is reportedly gearing up for another buyout, with plans to acquire one of the largest U.S. satellite TV operators – DIRECTV DTV.

According to Bloomberg reports, AT&T is already in talks to buy DIRECTV for about $50 billion. Although nothing has been reported officially as yet, the deal is expected to be a combination of cash and stock bid of between $92.00 and $95.00 per share.

AT&T already operates as one of the strongest players in the wireless business. We believe this prospective buyout will likely elevate its position in the pay-TV business, which is currently catered to by its U-Verse brand.

According to reports, the planned acquisition of DIRECTV will promote AT&T to the second-largest position in the domestic pay-TV business, just behind Comcast Corp. CMCSA. The company will gain a video customer base of 20 million, expanding its current base of 6 million customers. The deal will also enable AT&T to integrate its U-verse network with DIRECTV's satellites and provide flexibility in utilizing its broadband speed for delivering content.  

The transaction is touted to be one of the biggest merger and acquisition deals in the pay-TV industry, which is undergoing significant consolidation. Earlier this year, Comcast struck a deal worth $45 billion to acquire Time Warner Cable Inc. TWC, making it a merger of the two largest cable companies in the U.S. With the proposed deal, AT&T would thus be in a position to tap significant opportunities budding from the ongoing changes in the cable television business. 

Acquisitions and strategic collaborations have played a major role in shaping AT&T's growth story. In this vein, recently, the company closed its acquisition of Leap Wireless International Inc. for $1.2 billion. This buyout will give AT&T control over Leap's spectrum in the PCS and AWS bands covering 138 million people, thereby enhancing the spectrum base of the former.

In addition, AT&T will also benefit from more customer care service facilities, low-cost data plans and robust financial resources. Further, the deal will endow AT&T with a stronger pre-paid business line with the incorporation of the Cricket brand.

Apart from the Leap acquisition, in 2014, the company also collaborated with automakers like Tesla Motors, Inc. TSLA and Audi for providing high-speed wireless connectivity. It also entered into an agreement with Vantiv, Inc. to offer new mobile payment products to businesses. The company is also developing new cloud-based products such as NetBond in partnership with Equinix, Inc. EQIX, to protect information by extending virtual private networks into the cloud.

AT&T currently has a Zacks Rank #3 (Hold).