AT&T Inc. on Sunday announced its decision to buy satellite TV provider DirecTV for $48.5 billion, or $95 per share.
Both companies describe the upcoming acquisition as transformational one as they are seeking ways to take on cable companies and online video providers, delivering content to multiple screens — on living room TVs, PCs, tablets and mobile phones.
With 5.7 million U-verse TV customers and 20.3 million DirecTV customers in the U.S., the combined company would score up to 26 million.
Experts claim that it would make the purchase the second-largest one behind a combined Comcast-Time Warner Cable, which would serve 30 million under a $45 billion merger proposed in February.
“What it does is it gives us the pieces to fulfill a vision we’ve had for a couple of years – the ability to take premium content and deliver it across multiple points: your smartphone, tablet, television or laptop,” AT&T’s Chairman and CEO Randall Stephenson said on a conference call with journalists Sunday.
“It gives us the parts to fulfill a vision we have had for a couple of years, that is, the opportunity and the ability to take premium content and deliver premium content over multiple points for the customer, whether it be through a smartphone, through a tablet, or television or laptop,” he added.
Stephenson’s counterpart at DirecTV, Mike White, is predicted to stay in his position and to head the satellite television business, which, like previously, will be based outside Los Angeles in El Segundo, California.
AT&T now offers its users a video service known as U-Verse and Stephenson unveiled the company’s plans to continue to offer it after the acquisition is completed. It expects the deal to close in about a year.
“AT&T and DirecTV made their announcement just a few months after Comcast Corp offered $45 billion for Time Warner Cable Inc, a transaction that would create the leading U.S. cable and broadband Internet powerhouse. The Comcast proposal is now awaiting regulatory approval,” Reuters writes.
“To help its case with regulators, AT&T will sell its roughly 8 percent stake in Carlos Slim’s America Movil, worth roughly $5 billion. DirecTV has some 18 million customers throughout Latin America,” the publoication adds.
Meanwhile the logic behind the upcoming acquisition has raised some doubts among investors. Thus, some of them have wondered why the company which is currently experiencing slowing but steady growth, would buy DirecTV at a time when growth in U.S. satellite TV subscriptions has stalled.
The growth of world popular video services like Netflix and Hulu mean that demand for satellite TV will slow further in the coming years.
There are also potential anti-competitive hurdles to clear. AT&T is likely to face questions from regulators about the deal’s impact on competition in those areas where its U-verse service now competes with DirecTV in offering television.