AT&T acquiring DirectTV

AT&T acquiring DirectTV
By Rene Ritchie on 18 May 2014 05:36 pm EDT
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AT&T has announced that they're planning to buy DirectTV. Rumored for weeks, the deal would give AT&T access to 20 million DirectTV 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 DirectTV 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/DirectTV 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.

Reader comments

AT&T acquiring DirectTV

60 Comments

Hasbro will be soon claiming copy rights here...

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Try to do what?

Seems to me that the big telecommunications companies are just going to keep buying and soon enough there will be total collusion with services and pricing

Posted via CB10

Yet you're ok being a Verizon customer? Their pricing is completely deceptive. "Only $70 a month (but there is a $40 "connection fee")!" Seriously, if there's no way around the "connection fee" then there is no reason to separate it, they should simply say $110 a month... AT&T is not cheap either but at least they tell you the price of their plan...

Posted without the aid of AutoCorrect with my physical keyboard via CB10

Horrible news. The last thing we need is LESS competition in the media world. Comcast should not be allowed to buy Time Warner, and AT&T should not be allowed to buy DirecTV. Both are too big already and control too much of the market.

Yes yes, but then consumers can "enjoy more content on more devices" out of one hand....

(forget to add:
... and likely pay more for it. But hey, think of all those wonderful new bundle package options... )

Zzzzwiped from a Zedevice....

At least where I live, AT&T was handling the internet, and may phone end of DirecTV anyways (i.e. if I was looking at a TV+internet package, DirecTV was only providing TV.) This was before U-verse came, but I doubt DirecTV started offering internet of their own, or AT&T stopped. So yes, while it might cut down on the overall number of competitors, were these two really competing or to a degree symbiotic?

DirecTV has a number of partnerships with Telcos to provide phone and internet services as a bundled package for their customers, and that provider is generally whoever is the biggest provider in that area. DirecTV doesn't actually offer those services, so that's not really an issue.

The issue in this case is TV SERVICE. AT&T is absolutely a direct competitor with Uverse anywhere Uverse is available (most cities and direct suburbs in AT&T's territory), and there are so few traditional TV providers to choose from that losing one absolutely IS a big deal.

Plus, it will inevitably lead to more things being "exclusive" to AT&T, which will screw over Verizon, Comcast, and Dish customers. Competition is vital - it's what helped accelerate the rollout of HD, DVR technology, and streaming services, and without competition, prices will go up and innovation will lag behind.

How many such markets are there, where AT&T and DirecTV were in direct competition anyways? Don't these companies generally try to avoid providing people with too many options in one given market, so as to not have to compete locally? I don't disagree with "less is bad," I'm just wondering how big a deal this is.

It's every single Uverse market, given that DirecTV is available nationwide. AT&T covers roughly half the country with local phone/Internet service, and while Uverse isn't generally offered in rural areas due to the limits of AT&T's infrastructure, it's available in just about every big city and immediate suburb of said city, so this affects a large number of people.

I have Directv, att dsl/phone line and Verizon cell. I just worry about lack of competition driving the market and pricing. We shall see.

Posted via CB10

How can Time Warner and Comcast merge? What exactly is the definition of a monopoly because I must be confused.

Buddha Stories - C0038CC70

The FCC and FTC ok these mergers, not the politicians. Sure, the politicians may appoint these people, but these are the same people who killed the AT&T and TMO merger.

"Sure, the politicians may appoint these people..." I think you just made my point. These are unelected officials making decisions, appointed by bought and paid for elected officials. Do you know anything about the head of the FCC - Tom Wheeler? Do you know who he is? Only the biggest former lobbyist for the big cable and wireless companies. All of his decisions are for them, NOT consumers like us. And if I remember correctly, AT&T gave up on the merger before anything could be killed by regulators.

I'm well aware of Tom Wheeler's background and recent decisions. But keep in mind, this is not as laissez-faire an administration (when it comes to unelected officials making decisions,) as evidenced by their backing of more relaxed SIM unlocking rules, and monitoring of and commitment to net neutrality. Also keep in mind that the FTC is going to get involved as well, it's not just in Tom Wheeler's hands. BTW, the same FCC also tightened the rules for the next spectrum auction, that will make it harder for AT&T and Verizon to buy everything up.

Gone are the days when these types of decisions made in backrooms and not heard of (and more importantly, protested/ridiculed) by the media and public.

Monitoring of and commitment to net neutrality? Tom Wheeler is championing internet "fast lanes" and while he's making minor changes under pressure, he's still pushing for this. If fast lanes are implemented, it'll be the beginning of the end for net neutrality and the internet as we know it will be very different in a few years. You definitely have some valid points, but the administration's pick of Wheeler is about as backwards and "corrupt" as it gets.

In 2007, Obama said, "I am in this race to tell the corporate lobbyists in Washington that their days of setting the agenda are over." I'll leave it at that...

I hope the TWC-Comcast merger doesn't happen. I've been watching the federal hearings all along. It would be a merger of the two companies rated at the very bottom for customer service. At the federal hearings the companies say how they'll save money due to the economies of scale, but when asked if it would help consumers pay less the Comcast official back pedals and says that "well, cconsumers will get more value for the money". Ha!

Back when Comcast had their previous merger hearings for the purchase of NBC Universal they specifically stated at the time that they won't be getting any larger, as well as stating that they still had a viable competitor in TWC. Well, so much for that..

 Lovin' my Z10! 

Amtelophographvision Direct...AD, which will be the MAIN content of the new company.

Murray Squire Marr

welcome to the communist republic of america, where freedom of choice no longer exists...lol

Posted via CB10

I have been trying for years to distance myself from AT&T and buying Direct give me another reason to pass on Direct TV. May they live happily ever after till death to they part.

If CB is going to be doing any reporting, at the very least, get the names right.

Its "DirecTV", not "DirectTV".

Thanks for clarifying that mix up. Originally I was indifferent but if it's DirecTV I am definitely against it.

Posted via CB10

Good one

On a serious note I have been avoiding AT&T for years, because of their notoriously poor customer service. This decision helps me make the decision to switch to
Fios or some other service - from directv. Directv had lost some of its appeal with their NFL package anyway, since my out of state team typically has 7 or 8 games on free network TV. You basically get screwed if you buy the package for one team - and your team is say the Cowboys, Patriots, Packers, or now even the Seahawks. They should've gone pay per view with the games, as an option. I certainly would pay $20 for games I can't see otherwise, rather than pay twice that for food and drinks at a bar.

Wait, what was this article about again? I think I've been holding my directv rage in for too long.

CB likes to live in between being a blog & a news site. They see themselves as a news site when they're breaking news on OS leaks and a blog when they're caught posting grammatical errors.

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The point is, I'm a nobody. If CB wants to be taken seriously, they should have the spelling of the name correct.

All the other websites I visited didn't make this error.

Posted via CB10

What happens to UVerse, then? To me, this isn't an assault against Verizon as much as it is against the smaller old telecom providers who bundle their DSL services with satellite, SuddenLink, CenturyLink, Frontier, etc.

The rich get richer and, in this market, it's not a good thing.

Courtesy  10.2.1 on my unlocked Z10

1. Why is everyone assuming this will get an ok from the FCC and FTC?
2. Why is this on CrackBerry? This isn't about BlackBerry, and this isn't even about AT&T the carrier (that BlackBerries use.)

Capitalism is being distorted into Corporatism .

Where there is lack of competition in the market. Companies stop competing and start colluding ,and before you know it price increases annually from competitors and your own provider..etc.

Posted via CB10

@juliussharpe: AT&T is buying DirecTV for $48 billion. But if they call and threaten to leave, they'll get it for $28 billion.

Posted via my Kick @ss Z30STA100-5/10.3.0.296

At&t will not have access to me. As soon as the deal goes through I am done with Directv. To bad I have had them for years but At&t service just sucks.

Posted via CB10

God help the Direct TV customers. I have uverse and copper service also from ATT. I have never seen such poor service and incompetent support in my life. Absolutely horrible.

Posted via CB10

I'm not one for big government, but I hope the bureaucrats crush this deal immediately. Just kicked AT&T to the curb and switched to Verizon. Now, I have to worry about s**t AT&T ruining my DIRECTV service like they did my wireless service and BlackBerry experience.

Posted via CB10

Does Blackberry have a hand in this deal? Will it improve the speed inwhich updates are released by service providers? Oh wait, it is a new partnership for BlackBerry right??? What? I am wrong and this article has absolutely nothing at all to do with this site or BlackBerry!!! The tell me what the hell you are wasting my time with this shit for?

Posted via CB10 on my Q10

Crackberry and all of the Mobile Nations sites also cover news and issues with carriers and this is a big story. No-one forced you to read the article, and even less coercion was given to comment.

Massive changes like this also affect the priorities of the carriers and can change the quality of customer service for better or worse so while it is news that affects mobile users it's not exactly BlackBerry news.

Posted via CB10

Yes, big story and huge to some but I'll placed in a forum dealing with blackberry. There are lots of headlining stories out there that the news, tech, sports etc. Forums cover every day. Most even bigger then this. Do you expect to see them here on Crackberry? No. Why, because they are irrelevant to the scope of the site. Just as this article is and the next one is. If somewhere in here Blackberry was even cursory mentioned I can see the possible connection; but as you can see it really has no apparent connection to the Company or it's products at all. As for replying to my question. I see you had the same need to voice your opinion as I did. I just see more relevance in my query.

Posted via CB10 on my Q10

As far as I'm concerned this will be a horrible deal. I've had so many issues with AT&T that I almost had to take legal action against them. Their customer service is a joke and you never can get a straight answer. I left all services I have had with them for other companies. I will do the same with my Direct TV service if and when this goes through.
Sadly, AT&T have lost focus of their customers and is not a company I will do business with. Might not just them, but I refuse to be treated badly for my money.

Posted via CB10