AT&T has agreed to acquire DirecTV for $49 billion. The two companies’ boards approved the agreement yesterday. The deal, which comes just three months after Comcast’s $45 billion agreement to purchase Time Warner Cable, will create a new pay TV giant as video consumption continues to move online. Combining AT&T and DirecTV would result in a company with 26 million pay TV subscribers in the U.S., second only to Comcast and Time Warner Cable if regulators approve their deal.
“There would not be many people who could put together something with a nationwide mobile platform, nationwide video platform and a 70 million household broadband build,” said AT&T Chief Exec Randall Stephenson.
“The deals show how the biggest companies in television and telecommunications are bulking up to face a changing media landscape. Growth is slowing in some markets, like pay TV and wireless subscriptions, and is exploding in others, like streaming video,” reports The Wall Street Journal. “The companies are betting that bigger scale will give them the resources to invest in new capabilities and the leverage to hammer out commercial arrangements in the media world.”
According to Stephenson, the two companies have considered joining forces for years. DirecTV CEO Mike White recently met with Stephenson in Los Angeles, and terms of the deal were later finalized over the phone.
“AT&T, which has 5.7 million subscribers for its U-Verse TV service, will become a more powerful force in pay TV by joining with the larger DirecTV. Theoretically, as a bigger provider, AT&T would get better rates from companies that license TV programming,” explains WSJ. “Having DirecTV in the fold could also advance AT&T’s ambitions in online video. Like many other telecom and tech companies, it is looking for ways to capitalize on surging consumer demand typified by the growth of streaming services like Netflix. Last year, AT&T and DirecTV each made unsuccessful bids for streaming service Hulu LLC, whose owners ultimately decided not to sell.”
Blair Levin, former chief of staff at the Federal Communications Commission, suggested the acquisition of DirecTV could be in response to the Comcast-Time Warner deal.
“Sometimes, deals are driven by hope and opportunity and sometimes they’re driven by fear and locking down customer bases,” he said.