AT&T’s $48.5 billion DirecTV bid is a blockbuster bet

Today’s big news within the telecoms industry is that of AT&T’s plans to purchase DirecTV in a deal worth over an eye-watering $48 billion. The merger will help AT&T become a leader in the mobile video space where latest research statistics points towards customers consuming more video than ever before on their mobile devices – something which is only set to increase.

Both companies combined will control around 26 million TV subscribers in the US and, if approved by regulators, would make it second only to Comcast and Time Warner Cable’s $45 billion merger if it also comes to fruition. The two companies already have history together through the bundling of DirecTV alongside phone and internet packages from AT&T.

“The media chessboard is moving more this year than it has in the past decade,” said Richard Greenfield, a media analyst with the brokerage firm BTIG. “You’re seeing major shifts. Everyone is jockeying for position.”

Moving forward, customers can now be offered complete packages from AT&T. The company has an existing but limited TV service through U-Verse – although the service isn’t available in many states.

Whilst DirecTV strengthens AT&T’s package offerings, it also provides major growth opportunity for DirecTV who has lost traditional TV revenue from customers switching to internet packages. In today’s press release, AT&T notes the acquisition will allow the company to “offer bundles that include video, high-speed broadband, and mobile services using all of its sales channels.”

AT&T’s CEO, Randall Stephenson, said in a statement that DirecTV 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.”

It is unlikely customers will see any changes as a result of this merger for some time. Stephenson says “really robust video offerings” are still around 12 to 18 months away.

The boards of each company approved the deal at $95 a share which provided the $48.5 billion valuation. AT&T confirmed the purchase will be a stock-and-cash deal. Previously, satellite TV competitor Dish Network gave thought to a similar merger with DirecTV, but the company’s CEO Charlie Ergen called it off after saying it would be too expensive.

How do you think the AT&T – DirecTV merger could affect the industry? Let us know in the comments.

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