AT&T is close to striking a $50 billion deal to acquire satellite TV provider DirecTV, according to people familiar with the matter. An agreement between the two companies involving a mix of cash and AT&T stock could be reached within two weeks. Insiders say the two sides are discussing a share price for DirecTV in the low to mid-nineties (at $95 a share, such a deal would value DirecTV at almost $48 billion). The deal comes as AT&T considers video distribution a potentially key initiative for its future.
“AT&T is expected to pay for any deal mainly with stock, one of the people said. For AT&T, using stock to help pay for such a transaction has the benefit of limiting its borrowings and thus helping protect its credit rating,” reports The Wall Street Journal. “But the more stock it issues, the greater its dividend obligations, which is another consideration the company is grappling with, some of the people said.”
“A deal could boost the flow of cash that AT&T could use to pay its dividend and fund a build out of its broadband Internet infrastructure, analysts have said. It also comes as AT&T increasingly views video — whether via pay TV service or delivered over the Web or its wireless network — as central to its future.”
On the AT&T side, the addition of satellite TV could potentially free up bandwidth for Internet connectivity to customers’ homes. For DirecTV, the deal could help with the dilemma of not being able to compete with broadband sales in the wake of declining subscriber growth.
The talks follow Comcast’s agreement to acquire Time Warner Cable for $45 billion. Meanwhile, Dish Network Chairman Charlie Ergen has expressed interest in a merger with DirecTV, but admitted he cannot outbid AT&T.