AT&T Inc. on Sunday agreed to buy satellite TV
provider DirecTV for $48.5 billion, or $95 per share, a deal both
companies described as transformational as they seek to take on cable
companies and online video providers, delivering content to multiple
screens —on living room TVs, PCs, tablets and mobile phones.

With
5.7 million U-verse TV customers and 20.3 million DirecTV customers in
the U.S., the combined AT&T-DirecTV would serve 26 million. That
would make it the second-largest pay TV operator behind a combined
Comcast-Time Warner Cable, which would serve 30 million under a $45
billion merger proposed in February.

“What it does is it gives us
the pieces to fulfill a vision we’ve had for a couple of years – the
ability to take premium content and deliver it across multiple points:
your smartphone, tablet, television or laptop,” AT&T’s Chairman and
CEO Randall Stephenson said on a conference call with journalists
Sunday.

The companies are aiming to eke out $1.6 billion in annual
cost savings in an increasingly expensive and maturing pay TV business.
The extra cash flow gives AT&T more ability to invest in its
landline and mobile networks for broader reach and faster speeds in a
market where it risks falling behind a bulked up Comcast-Time Warner
Cable.

The companies promised consumer benefits like more
economical bundles that tie mobile phone, pay TV and Internet service
together on a single bill.

But the deal could face unique
regulatory scrutiny from the Federal Communications Commission and
Department of Justice. Unlike the cable company tie-up, the
AT&T-DirecTV merger would effectively cut the number of video
providers from four to three for about 25 percent of U.S. households.
That’s a situation that could result in higher prices for consumers and
usually gives regulators cause for concern.

Stephenson said those concerns would be addressed with a number of what he called “unprecedented” commitments. Among them:

– DirecTV would continue to be offered as a standalone service for three years after the deal’s closing.


AT&T would offer standalone broadband service for at least three
years after closing, so consumers could consume video from Netflix and
other online services, with download speeds of at least 6 megabits per
second where feasible.

– AT&T would expand high-speed
broadband access to 15 million more homes – beyond the 70 million that
could now get AT&T service – within four years.

– AT&T
vowed to abide by the open Internet order from 2010 that the Federal
Communications Commission is now in the process of revising after a
court struck it down.

– AT&T vowed to sell its roughly 9 percent stake in Latin American wireless carrier América Móvil for about $5 billion.

“This is going to prove to be a pro-competitive and pro-consumer transaction,” Stephenson said.

AT&T
and DirecTV expect the deal to close within 12 months. Under the terms
announced 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.

Stephenson and
DirecTV CEO Michael White both said the merger would allow the combined
company to offer video over multiple screens, but acknowledged that
deals with content providers to expand service on multiple platforms
still need to be negotiated.

White said that, for example,
DirecTV’s exclusive deal for its signature product, NFL Sunday Ticket,
expires at the end of the coming season. He said he was “confident” the
deal would be extended with the NFL on an exclusive, long-term basis,
and noted that in the past, DirecTV has sold the football package
directly to online platforms, such as to users of Sony’s PlayStation.

“This
positions us well to compete in the 21st century,” White said. “I think
our future is bright together in ways that make both of our companies
stronger.”

Analysts have questioned the strategic benefits of a
deal, particularly because it 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.

DirecTV offers neither fixed-line or
mobile Internet service, and its rights to airwave frequencies for
satellite TV are not the kind that AT&T can use to improve its
mobile phone network.

Still, Stephenson has talked exuberantly
about how the growth of online video helps boost demand for its Internet
and mobile services. Last month, AT&T entered a joint venture with
the Chernin Group to invest in online video services.

DirecTV would continue to be based in El Segundo, California, following the merger, the companies said.

 

Read Original Story At Huffington Post.