AT&T Said To Be Considering Acquisition Of DirecTV
AT&T (NYSE: T) was in the process of considering a move to acquire satellite provider DirecTV (NASDAQ: DTV), according to sources who spoke with the Wall Street Journal Thursday. The deal would likely be worth $40 billion, DirecTV’s current market capitalization.
If DirectTV’s 20 million subscribers combined with the 5.7 million served by AT&T’s landline-based pay TV business, the resulting almost 26 million customers would come close to the combined Comcast/TWC audience of 30 million.
As more and more customers unhook from satellite and cable in favor of streaming, growth for companies like DirecTV has begun to slow down. In addition, currently about 90 percent of U.S. households with television subscribe to cable, satellite or a phone company option.
The combination of market saturation and the growth of streaming video means satellite firms especially are vulnerable since they cannot independently offer Internet.
All this points to a buyer’s market for AT&T when it comes to convincing DirecTV to agree to merger talks. AT&T, on the other hand, could use a solid base for video delivery and DirecTV would provide that.
As with the proposed Comcast and Time Warner Cable merger, any deal between AT&T and DirecTV would likely face tough regulatory scrutiny.
In addition, such a proposal would be fodder for politicians seeking to score points with voters about consumer protection issues.
If AT&T and DirecTV could show they would provide strong competition for Comcast and Time Warner Cable, both proposals could stand a better chance of approval.
Reuters noted that all this merger talk would put Dish (NASDAQ: DISH) satellite network at a disadvantage if it doesn’t find a merger partner. Reports of talks between Dish and DirecTV in March did not lead to an agreement.
Wall Street responded to the AT&T, DirecTV merger rumors by raising DirecTV shares to a 52-week high of $81.90 Thursday morning.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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