AT&T acquiring DirecTV

AT&T has announced that they're planning to buy DirecTV. Rumored for weeks, the deal would give AT&T access to 20 million DirecTV customers and, theoretically, make them more competitive with Comcast, which is in the midst of their own merger with Time Warner Cable. What's especially interesting is that AT&T clearly sees this deal as fueling more than simply traditional television service:

The premier pay TV brand with the best content relationships now poised to deliver video to multiple screens – mobile, TV, laptops and more – to meet consumers' future viewing and programming preferences

The deal "implies a total equity value of $48.5 billion and a total transaction value of $67.1 billion" which is a huge chunk of change. AT&T and DirecTV already work together, so marriage is simply their next step. Regulators still have to approve, of course, but the question for right now is — do you want it? Will a unified AT&T/DirecTV give you better service or less competition?

Source: AT&T

AT&T to Acquire DIRECTV

DALLAS, TEXAS and EL SEGUNDO, CALIF. – May 18, 2014 – AT&T (NYSE:T) and DIRECTV (NASDAQ:DTV) today announced that they have entered into a definitive agreement under which AT&T will acquire DIRECTV in a stock-and-cash transaction for $95 per share based on AT&T's Friday closing price. The agreement has been approved unanimously by the Boards of Directors of both companies.

The transaction combines complementary strengths to create a unique new competitor with unprecedented capabilities in mobility, video and broadband services.

DIRECTV is the premier pay TV provider in the United States and Latin America, with a high-quality customer base, the best selection of programming, the best technology for delivering and viewing high-quality video on any device and the best customer satisfaction among major U.S. cable and satellite TV providers. AT&T has a best-in-class nationwide mobile network and a high-speed broadband network that will cover 70 million customer locations with the broadband expansion enabled by this transaction.

The combined company will be a content distribution leader across mobile, video and broadband platforms. This distribution scale will position the company to better meet consumers' future viewing and programming preferences, whether traditional pay TV, on-demand video services like Netflix or Hulu streamed over a broadband connection (mobile or fixed) or a combination of viewing preferences on any screen.

The transaction enables the combined company to offer consumers bundles that include video, high-speed broadband and mobile services using all of its sales channels -- AT&T's 2,300 retail stores and thousands of authorized dealers and agents of both companies nationwide.

"This 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. At the same time, it creates immediate and long-term value for our shareholders," said Randall Stephenson, AT&T Chairman and CEO. "DIRECTV is the best option for us because they have the premier brand in pay TV, the best content relationships, and a fast-growing Latin American business. DIRECTV is a great fit with AT&T and together we'll be able to enhance innovation and provide customers new competitive choices for what they want in mobile, video and broadband services. We look forward to welcoming DIRECTV's talented people to the AT&T family."

"This compelling and complementary combination will bring significant benefits to all consumers, shareholders and DIRECTV employees," said Mike White, president and CEO of DIRECTV. "U.S. consumers will have access to a more competitive bundle; shareholders will benefit from the enhanced value of the combined company; and employees will have the advantage of being part of a stronger, more competitive company, well positioned to meet the evolving video and broadband needs of the 21st century marketplace."

DIRECTV has premier content, particularly live sports programming. It has the exclusive pay TV rights to NFL SUNDAY TICKET that provides every out-of-market game, every Sunday afternoon, on TV, laptops and mobile devices. The new AT&T will be better positioned to develop unique content offerings for consumers through, among other initiatives, AT&T's joint venture with The Chernin Group. Today, DIRECTV's content ownership includes ROOT SPORTS Networks and minority stakes in the Game Show Network, MLB Network, NHL Network and the Sundance Channel.

DIRECTV will continue to be headquartered in El Segundo, California, after the deal closes.

Customer Benefits and Commitments, Upon Closing

Together, the companies will be a stronger competitive alternative to cable for consumers wanting a better bundle of top-quality broadband, video and mobile services, as well as a better customer experience and enhanced innovation. Consumers will also benefit from the combined companies' additional scale in video content distribution across its mobile, video and broadband networks. The combined company will continue to provide the world-class service and best video and entertainment experience for which DIRECTV is known.

With the benefits of the transaction, AT&T is able to commit to do the following, when the deal closes:

  • 15 Million Customer Locations Get More High Speed Broadband Competition. AT&T will use the merger synergies to expand its plans to build and enhance high-speed broadband service to 15 million customer locations, mostly in rural areas where AT&T does not provide high-speed broadband service today, utilizing a combination of technologies including fiber to the premises and fixed wireless local loop capabilities. This new commitment, to be completed within four years after close, is on top of the fiber and Project VIP broadband expansion plans AT&T has already announced. Customers will be able to buy broadband service stand-alone or as part of a bundle with other AT&T services.

  • Stand-Alone Broadband. For customers who only want a broadband service and may choose to consume video through an over-the-top (OTT) service like Netflix or Hulu, the combined company will offer stand-alone wireline broadband service at speeds of at least 6 Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing.

  • Nationwide Package Pricing on DIRECTV. DIRECTV's TV service will continue to be available on a stand-alone basis at nationwide package prices that are the same for all customers, no matter where they live, for at least three years after closing. Net Neutrality Commitment. Continued commitment for three years after closing to the FCC's Open Internet protections established in 2010, irrespective of whether the FCC re-establishes such protections for other industry participants following the DC Circuit Court of Appeals vacating those rules.

  • Spectrum Auction. The transaction does not alter AT&T's plans to meaningfully participate in the FCC's planned spectrum auctions later this year and in 2015. AT&T intends to bid at least $9 billion in connection with the 2015 incentive auction provided there is sufficient spectrum available in the auction to provide AT&T a viable path to at least a 2x10 MHz nationwide spectrum footprint.

Latin America

DIRECTV's Latin American business is the leading pay TV provider in the region and has more than 18 million subscribers, including all Sky Mexico customers. DIRECTV's satellite platform's broad reach remains advantaged when compared with cable and telco in Latin America. Latin America has an underpenetrated pay TV market (about 40% of households subscribe to pay TV) and a growing middle class, and is DIRECTV's fastest growing customer segment.

Summary Terms of Transaction

DIRECTV shareholders will receive $95.00 per share under the terms of the merger, comprised of $28.50 per share in cash and $66.50 per share in AT&T stock. The stock portion will be subject to a collar such that DIRECTV shareholders will receive 1.905 AT&T shares if AT&T stock price is below $34.90 at closing and 1.724 AT&T shares if AT&T stock price is above $38.58 at closing. If AT&T stock price at closing is between $34.90 and $38.58, DIRECTV shareholders will receive a number of shares between 1.724 and 1.905, equal to $66.50 in value.

This purchase price implies a total equity value of $48.5 billion and a total transaction value of $67.1 billion, including DIRECTV's net debt. This transaction implies an adjusted enterprise value multiple of 7.7 times DIRECTV's 2014 estimated EBITDA. Post-transaction, DIRECTV shareholders will own between 14.5% and 15.8% of AT&T shares on a fully-diluted basis based on the number of AT&T shares outstanding today.

AT&T intends to finance the cash portion of the transaction through a combination of cash on hand, sale of non-core assets, committed financing facilities and opportunistic debt market transactions.

To facilitate the regulatory approval process in Latin America, AT&T intends to divest its interest in América Móvil. This includes 73 million publicly listed L shares and all of its AA shares. AT&T's designees to the América Móvil Board of Directors will tender their resignations immediately to avoid even the appearance of any conflict.

Transaction Creates Immediate and Long-Term Shareholder Value

AT&T expects the deal to be accretive on a free cash flow per share and adjusted EPS basis within the first 12 months after closing.

The combination provides significant opportunities for operating efficiencies. AT&T expects cost synergies to exceed $1.6 billion on an annual run rate basis by year three after closing. The expected synergies are primarily driven by increased scale in video.

Along with DIRECTV's current strong cash flows, this transaction is expected to support future investment in growth opportunities and shareholder returns.

The combination diversifies AT&T's revenue mix and provides numerous growth opportunities as it dramatically increases video revenues, accelerates broadband growth and significantly expands revenues from outside the United States. Given the structure of this transaction, which includes AT&T stock consideration as part of the deal and the monetization of non-core assets, AT&T expects to continue to maintain the strongest balance sheet in the industry following the transaction close.

AT&T's 2014 guidance for the company remains largely unchanged. However, the company's intention is to divest its interest in América Móvil, which will result in an approximately $0.05 reduction in EPS, as the América Móvil investment will no longer be accounted for under the equity method. Adjusted 2014 EPS growth is now expected to come in at the low-end of the company's mid-single digit guidance.

The merger is subject to approval by DIRECTV shareholders and review by the U.S. Federal Communications Commission, U.S. Department of Justice, a few U.S. states and some Latin American countries. The transaction is expected to close within approximately 12 months.

Conference Call/Webcast

On Monday, May 19, 2014, at 8:30 a.m. ET, AT&T and DIRECTV will host a webcast presentation to discuss the transaction. Links to the webcast and accompanying documents will be available on both AT&T's and DIRECTV's Investor Relations websites.

 
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AT&T acquiring DirecTV

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Should make for an interesting setup. I have uverse right now, been very happy with it. Whether this remains, I don't know. Hopefully it's for the better.

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Let the complaining begin! Haha I for one am gonna try to be positive about this and hope that something good comes out of this. I love both companies and have been a long time customer of both. But I guess only time will tell.

There's nothing here to be positive about. Two corporate giants merge and will throw even more weight around in the government. The ultimate loser will inevitably be consumers. Consumers never win when huge corporations merge.

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I couldn't agree more. I think these media giant mergers are extremely bad for the free market and consumers.

Not to mention Directv customers who have been happy for the last 6 years!!! I FN HATE ATT!!! i left them as a wireless carrier and damn sure i dont want to be forced into them as a cable provider. They obviously wont be able to mess with my contract but once that's over i am OUT!! LATER DirecTV, it was good while it lasted!

T-Mobile & MetroPCS seem to be working out quit well. Working well on the MetroPCS side cause their customers now have much better phone selection, and much better coverage, and on the T-Mobile side cause of merging of spectrum for far faster LTE.

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That's a great example. But, quite honestly, I never really considered them to be competitors. T-Mobile competes directly with the other big carriers (Sprint, Verizon, AT&T), whereas Metro PCS was competing more with brands like Cricket, Virgin Mobile, etc.

But, even counting them as competitors, there are numerous companies (from the big four down to the MVNOs) in the wireless industry that such a move doesn't shift the balance of power in favor of one company or group of companies.

Whereas, in the cable industry, if both this merger and the Comcast-TWC merger go through, that industry is effectively a two-horse race for a massive percentage of consumers that still use any of those services.

But, yeah, Metro PCS is working out great for T-Mobile.

Work for Cox, and the only real big cable companies are/were TWC and Comcast. They are substantially bigger than #3, which is Charter Cable if I remember correctly.

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Sirius and XM merger was another great merger. Nobody was winning when they were separate. Not either of them or the customer.

I have Sirius BECAUSE they merged. I don't want two half assed companies competing. One strong one is optimal.

Nexus 4 - CM10.1.3

You're either 12 years old with no life experience or don't understand economics. This is one of the best mergers that could've happened. I can't wait to give them a shot (As a current att customer). I have Comcast and not that it sucks, but it's expensive.

You're Mr. "competition", so now here's a REAL competitor and yet you still complain. I'm starting to think you're just a 12 year old troll.

Nexus 4 - CM10.1.3

All I know is that I wish I were a religious person, so that I could pray that Google chooses Charlotte as one of their next Fiber project cities. I would have never thought that Charlotte would ever be considered, because of the entrenched political clout of Time Warner in this trashnest. I think the possibility that Comcast will be gobbling up TWC, has to have changed the influence that they once had, and given the politicians reason to consider that another option (and considerably better value) might not be so bad for the people here.

We made it through step 1. So far so good.

Eh, the more users they have, the less need they have to pay the NFL millions and millions of dollars for that kind of service.

With the Sunday Ticket contract ending after next season I hope Directv regains it. With ATTs blessing of course...

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I have DirecTV but I'm in the midst of canceling and going to Dish.

This just takes another competitor out. Very little choice now.

You're joking, right? If an industry has five companies and one company decides to absorb another, then you now only have four companies in that industry. I understand, we're arguing on different sides of the fence. But, let's not forget basic math skills.

I agree totally with hating on the merger but...

Att does not have satellite service of there own, and Direct TV is not going to go away. ATT will keep the service running...

Yeah, but my point is that AT&T would no longer be competing with DirecTV. Think about it: even though one is cable and the other is satellite, if you love in an area where only AT&T and DirecTV are offered, then AT&T effectively has a monopoly on TV service for that area.

Exactly.

I have no clue how anyone here doesn't understand that concept.

AT&T is aiming to be largest company in Earth I suppose. They consistently look to acquire relatively large companies. Cricket, T-Mobile, Cingular , DirecTV, etc.

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I have a hunch that he didn't realize that AT&T sold tv service. I didn't know that they did until I moved to Ohio.

Well I was already in process of doing so. I think it's different for a lot of people. Some people have terrible experiences with really good companies.

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I pay for at uverse internet and DirecTV, over $260/mo combined. So what's in it for me? better be cheaper!

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It's ridiculous. I've had smaller car payments! $65 for at t internet and $185 for Directv, 4 TVs, I'm sick., I need help!

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That merger would never be allowed to happen. Especially with all the states the Verizon has burned with promises of rolling out there FiOS network and to have it fall short of there promise. Comcast would be smart to stay away from any talks that has to do with merging with Verizon.

Not even just "states". Here FIOS has been around for many years. But they cover very little area. They simply picked all the most profitable "richer" or "easier" neighborhoods for deployment and left all the others out of the picture (like mine). My guess is that far less than 1 in 20 addresses has access to FIOS and I don't think it has improved much.

They are smart not to put it in high Churn neighborhoods. It's pretty expensive to run new plant to areas, and I'm sure they know how long it takes to recoup there costs.

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Why even pay for TV service with so many streaming offers out there? Just get an ISP and a few streaming services and call it a day. That's savings!

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Quality is not as good? Are you sure about that? I cut the cord ages ago, and I've never had any issues with the quality of my streams using Time Warner Cable's internet.

His solution obviously wouldn't apply to anyone that doesn't have high-speed internet, anyway, so that seems like an irrelevant comment to make.

As true as your comment is for some people, you can't deny that cutting the cord does save a hefty amount of money, especially considering most of the shows people watch are available via the internet via legitimate streaming or pirating.

You're right it is cheaper, however I do live in the boondocks and all I can get is DSL. I am also a big sports guy and options are sometimes limited.

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Yeah, I honestly don't notice any difference in video or audio quality between watching a show on Hulu versus watching it live on Comcast cable (although granted, my 42" Vizio TV doesn't have the highest-end screen by a long shot). When I have a choice, I prefer to watch shows on Hulu and Netflix via Chromecast rather than use Comcast's On Demand service, simply because the On Demand interface is garbage and hasn't been updated at all since the service was launched over ten years ago.

Yeah, watching Netflix, YouTube, etc via Chromecast yields a great viewing experience. Not to mention, by streaming all of your content, you have more control over it, vice Comcast, etc picking and choosing what content to make available to you.

I'm all ghetto with an HDMI cable from my laptop to my TV and a Bluetooth mouse on my night stand.

Not a sports guy here. Not enough to let the providers have me by the balls anyway.

Ummm...Sports are available online, as well. And, I'm not sure how an option that may not work FOR YOU is automatically stupid.

Not the same. If you have had the NFL package on directv and were a big NFL fan, there is NOTHING that even equals it. You can get some of it, and probably pretty close with a few different things but its just not the same.

For sports, I haven't missed a beat, using websites such as justin.tv, First Row Sports, etc. And, I never implied that it would be the same for everyone. But, just because it doesn't work for either of you, does not all of a sudden make it a stupid idea, especially if it's practical and cost-cutting for those that are able to do it.

I never said it was stupid. Different strokes for different folks. I am gonna have to check out some of the sites you mentioned. The ONLY sport I Really care about is football though. So If I can get my games for that it would be a done deal. Everything else is just things in between football seasons. ;-)

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i would be the first to jump on that IF i could get EVERYTHING i get on directv... but you cant. Its not possible. there isnt a perfect solution to this one yet.

"Why even pay for TV service with so many streaming offers out there?"

Not everyone has access to high speed Internet capable of streaming reliably or at the best HD quality. Even if you do, it's putting all your eggs in one basket; lose Internet service lose TV too. Also, streaming doesn't cover live sports very well, in particular NFL (ex. NFL Sunday Ticket has no equal). :)

Nothing good will come of this. UVerse is not available where I live. Nor will it be as my city will not allow them to upgrade to fiber.

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"We dont allow your kind around here" - is what i picture your town yelling with pitch forks and torches.... you need a new zip code.

I don't see how this will make them more competitive with Comcast seeing that AT&T does not provide data and voice services here in Mass or the Northeast that I am aware of? This will basically on them a precense here for TV services. I could be wrong but at my last 3 places I could not get AT&T services at all here.

So, with Comcast buying Time Warner Cable, and, now, AT&T buying DirecTV, what am I supposed to be positive about? This industry is literally turning into a duopoly.

And, let's not kid ourselves, here: this shit will not result in lower prices. Industry consolidation leads to less competition: last time I checked, less competition lead to higher prices, not lower.

It's gonna be Dish vs "Mega-AT&T" and "Mega-Comcast." Yeah, that scenario looks really competitive.

But in most places you only get one or two options to begin with. I can't get ATT Uverse or Time Warner now regardless. I have Directv because my options were Directv, Dish, Comcast and Verizon...Directv won out because they have the NFL package and Comcast and Verizon were awful.

There might be alot of providers now, but in most areas we're still looking at 2 providers plus Satellite options. Not too many places have all the options.

FCC is concerned more with killing net neutrality than stopping a monopoly from forming. The less choices we have, the more power these corporations have to dictate the terms of any policy thus impacting our freedoms. 1984 is closer and closer to becoming reality.

The panda has spoken

I have Uverse right now, but I've had Direct TV in the past. Love both of them. This is a win win for me.

It's a win-win until you end up paying more than you did before the merge.

Consolidation is never a win-win for consumers.

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I have a two agreement for now. Not worried about a price hike. Direct TV is not cheap, but you get way more for your money then you would with Comcast. Comcast lied so many times to me. I was so glad to get rid of them. I would pay more to stay way from lying Comcast!

Nope nope nope... Not interested. I just signed a 2 year agreement and will be switching back to Comcast as soon as it's up. Not interested in giving any of my money to ATT.

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Well there goes Directv. Left AT&T after many many years because of lacking CS. SAD :(

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Do not want. Don't watch TV anyway so the only interest I have is what, if anything, will this do to my internet services rates?
I refuse to take any sort of a bundle to get the one service I actually need and want.

At&t's customer service is so horrible and was the primary reason for me leaving them and going to Comcast. I thought the customer service would be better since it was TV but it is just as bad probably worse then their mobile phone customer service.

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The fact that these telcos can even consider these deals proves we are grossly overpaying them.

For consumers, this is not good.

Yep, Verizon paying Vodafone a whopping $130bln is proof of how much people are overpaying Verizon.

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So glad I went with Dish Network. Been with them for 9 years. My daughter got sucked into the DirectTV low cost introductory offer last year. She is with Dish now & a lot happier.

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Any involvent with AT&T would immediately compel me to breach contract and exit said new company without question.

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Well, I guess I'll be canceling my DirectV service soon. AT&T Uverse is horrible. Where is Google Fiber?

Less competition is never better. Consumers always lose out in the end. Be ready for changes. They are coming whether we want them or not.

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I thought Verizon was in contract with direct tv? Fios isn't in my area so if I wanted a package ie. tv, Internet and phone. I'd have to get direct tv with the Verizon package.

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As a happy Directv subscriber why do I have the feeling AT&T is going to ruin them

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I'm reading all the comments and I'm just thinking... Thank God i work for a cable company because my Bill is less than $35 a month. I will always have a job although the job description might change. I've been through 2 mergers and let me say i feel for the customers. It can be an ugly process merging. Features from both sides will most likely be changed or lost. Honestly yes this would be a huge merge but i think the twc Comcast merge is worse. Comcast is the largest cable provider, especially now with twc. But Comcast and twc were not direct competitors. Att and direct tv are because they are offered in the same area most of the time. The main competitors of cable companies are FiOS and satellite. Not other cable companies. So the benefit for Comcast was customer based. This merge is about expanding and gaining a huge leg up by taking in existing customers and reducing competition. This is a huge opportunity for att to really compete on the consumer TV side of things. It will be interesting to see the effect this has on cable companies that competed with direct tv. It might end up benefiting those customers by forcing the cable companies to expand offerings and services. Change sucks sometimes but can also promote growth.

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I had an unlocked iPhone and AT&T didn't want to give me a month to month plan, finally I got one and then they kept charging me after I left the country! AT&T is the WORST!

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I have an ATT cell phone and DirecTv for my home...happy with both (although alittle pricey), maybe this will allow me to bundle my services.

We have AT&T for Internet (DSL - only viable option in the area) and a land line (required for work purposes), as well as Directv for television (again no other viable option besides Dish. No U-Verse as AT&T has yet to upgrade the area infrastructure to support it). Have to say we've been happy with each of these respective services. Hopefully, this acquisition results in a bundling option that could reduce the bill. Otherwise we have no use for AT&T wireless as Verizon has much better coverage. Will have to see how this plays out to make a final judgement.

Interesting, thanks for posting that. We're huge NFL Sunday Ticket fans (only way to watch the Broncos and Panthers every Sunday) since we're not directly in their market. It's a BIG reason we subscribe to Directv! Not sure what we would do if they were to ever lose Sunday Ticket. :(

One thing people forget when major companies merge like this and think the sky is falling, is that you can always just opt out entirely and go another route. I for one just found out about this merger when I called DirecTV today to find out when my contract ends. I will be canceling directv and it has nothing to do with this merger, it has to do with the fact that cable tv prices are just ridiculous. I guess if you sit in front of your tv 24 hours a day it might be worth it, but for me I have like 400 channels pay $160 a month and all I ever watch is whatever I record on the dvr, HBO and Starz. And that is not that often, I watch Netflix more than cable because of the kids. So I can save $160 a month and if I want to buy a TV series it's like I got the whole series for free since I am so used to spending so much on 360 worthless channels.