AT&T Acquires DirecTV, Taking Aim at the Comcast/Time Warner Juggernaut
AT&T, sensing that the Comcast/Time Warner Cable merger might be an issue for its attempt to dominate the Internet market, has agreed to shell out $48.5 billion to acquire DirecTV.
AT&T, sensing that the Comcast/Time Warner Cable merger might be an issue for its attempt to dominate the Internet market, has agreed to shell out $48.5 billion in cash and stock to acquire DirecTV. The merger will make AT&T the second-largest pay TV provider in the country, behind the Comcast/Time Warner behemoth.
The deal is actually worth $67.1 billion when you include DirecTV's debts, which AT&T will assume. DirecTV shareholders will receive $95 per share, "comprised of $28.50 per share in cash and $66.50 per share in AT&T stock."
Rumors that an AT&T/DirecTV deal was imminent began earlier this month, when the Wall Street Journal reported that AT&T had approached the satellite TV provider. The deal will give AT&T access to a much larger pay television consumer base than it had with its U-Verse program and give DirecTV's customers access to another internet provider, which may be a welcome change for some dissatisfied cable customers. Of course, it also means we've got another case of pay TV providers consolidating -- something they've done with increasing frequency over the last two decades -- which ultimately leaves fewer options for consumers.
"The industry needs more competition, not more mergers," John Bergmayer of consumer advocacy group Public Knowledge told the Washington Post. "We'll have to analyze this one carefully for potential harms both to the video programming and the wireless markets."
Needless to say, $48.5 billion is a lot of money. So was the $45.2 billion Comcast paid for Time Warner Cable. From a customer standpoint, it would've been great if this money had gone towards improvements in the services these companies provide -- faster and more reliable internet, for example, or better customer service -- but these deals aren't about the customers, are they?
The deal is expected to close within 12 months.
Update, 10:12 p.m.: It should be noted that the deal is by no means certain, and has to be approved by regulatory bodies (just like the Comcast/Time Warner Cable deal). AT&T's last big acquisition attempt, T-Mobile, was blocked in 2011. As Bloomberg points out, if the deal falls through, AT&T will have to pay a termination fee to DirecTV. Which is not unlike the termination fee you have to pay DirecTV if you cancel your subscription early, except slightly more expensive.