May 19--AT&T is spending big bucks to compete head-to-head with
The purchase pairs the high-speed Internet capabilities of the telecommunications heavyweight with premium cable channels and built-in subscribers of the television provider, in a move that will make AT&T the second-largest pay-TV operator in the U.S., with roughly 26 million customers.
"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," AT&T's Chairman and CEO Randall Stephenson said in a statement.
The AT&T buy follows the Comcast/TimeWarner deal that -- once complete -- will create the nation's largest cable company, a move which analysts say leaves consumers with fewer options.
"The industry needs more competition, not more mergers," said John Bergmayer, a senior staff attorney at Public Knowledge. "We'll have to analyze this carefully for potential harms both to the video-programming and the wireless markets."
The deal could face tough scrutiny from the Federal Communications Commission and antitrust regulators at the Department of Justice. Unlike Comcast Corp. and
The combination would reduce consumers' options for pay TV providers from four to three for about 25 percent of U.S. households, according to
While DirecTV has a large presence in the U.S., it also has 18 million subscribers in Latin America. In 2013 the El Segundo, Calif.-based company generated $8 billion in profits off $32 billion in revenue, making it a tempting, cash-rich target for AT&T, analysts said.
But they question the strategic benefits of a deal that would give AT&T a larger presence in the mature market for pay TV.
Last year, pay TV subscribers in the U.S. fell for the first time, dipping 0.1 percent to 94.6 million, according to Leichtman Research Group.
While AT&T and DirecTV are doing better than cable companies at attracting TV subscribers, DirecTV's growth in the U.S. has stalled while AT&T is growing the fastest of any TV provider.
AT&T and DirecTV expect the deal to close within 12 months. Under the terms agreed to Sunday, DirecTV shareholders will receive $28.50 per share in cash and $66.50 per share in AT&T stock. The total transaction value is $67.1 billion, including DirecTV's net debt.
Herald wire services contributed to this report.