**Editor’s Note: Please click here for a recap of the biggest communications mergers in Q1 2014.**
AT&T and DirecTV on Sunday made the announcement that was expected for weeks: The phone giant will buy the satellite operator for $49 billion in a deal that will have a significant impact on America’s television landscape.
The deal means that the combined company will be able 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.”
The proposed merger between such large communications companies will certainly go under significant regulatory scrutiny before it is approved. It also raises questions about the impact this announcement will have on other pending acquisitions and those that have been rumored, but not yet announced.
Many industry insiders have speculated that if an AT&T-DirecTV deal were to happen, that AT&T’s chief rival – Verizon – wouldn’t dare sit on the sidelines. Might Big Red and DISH Network, DirecTV’s No. 1 rival, make a move to merge? DISH has been active in its own right in the past couple of years, making a play first to buy broadband provider Clearwire, and then Sprint, America’s No. 3 wireless provider – coming up empty in both attempts.
The AT&T-DirecTV transaction also raises questions about Comcast’s $45 billion acquisition of Time Warner Cable. It’s hard to imagine that regulators would approve AT&T’s deal but not this one. AT&T CEO Randall Stephenson last month said in March that he expected Comcast-TWC to get the green light. The major difference here, of course, is that Comcast and TWC are both cable companies; yet, the approval of both deals will essentially take two major players out of the television market.
The other merger proposal likely on the horizon is Sprint and T-Mobile, the third- and fourth-largest wireless operators. Government regulators have a lot of tough decisions ahead of them. Will all of these acquisitions wind up reducing choice and cost consumers more, or will they offer customers a stronger company from which to get their services?
Meantime, late Sunday, AT&T said it would sell its $6 billion stake in Mexico-based phone giant América Móvil “to facilitate the regulatory approval process in Latin America,” AT&T noted, as reported by the Wall Street Journal. DirecTV has satellite operations in Latin America, so selling its América Móvil would likely be necessary for AT&T to get approval for the transaction.
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