After months of discussions, AT&T finally clinched pay TV brand DirecTV in a deal valued at $48.5 billion. The American telecom carrier will sell its equity stake in America Movil, which has strong presence in the Latin American mobile market.
AT&T will exit from America Movil by selling 73 million publicly listed shares to address regulatory compliance in Latin America because DirecTV has a strong presence in the video market there.
Earlier, American media reported that AT&T would pay around $50 billion to acquire DirecTV in a bid to reduce pricing pressure in the wireless market.
The deal with DirecTV is expected to make AT&T a content distribution leader across mobile, video & broadband platforms. AT&T will cover 70 million customer locations with our broadband expansion. AT&T will not pay any fee to DirecTV if they do not get approval from the regulator.
Following the deal, AT&T will expand high-speed broadband to 15 million customer locations, primarily in rural areas. This will be done in 4 years.
DirecTV deal details
AT&T will acquire DirecTV in a stock-and-cash transaction for $95 per share based on AT&T’s Friday closing price. DirecTV shareholders will own around 14.5-15.8 percent of AT&T shares. 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.
DirecTV needs AT&T
DirecTV has 20.3 million U.S. subscribers, while AT&T serves 5.6 million video customers connected to its U-Verse network. DirecTV’s subscriber growth has slowed. It doesn’t have a landline network to deliver high-speed Internet services to homes, unlike phone and cable TV companies.
The deal will assist DirecTV to take on the combined entity between Comcast and Time Warner Cable. If combined, AT&T-DirecTV would serve roughly 26 million pay-TV customers. That would be less than the 30 million Comcast would have if regulators approve its purchase of Time Warner Cable.
AT&T promises more to get approvals
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, said AT&T.
For customers who only want a broadband service and may choose to usee 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.
AT&T will continue to offer DirecTV service on a stand-alone basis at nationwide package prices for at least three years after closing.
In 2015, AT&T will bid at least $9 billion provided there is sufficient spectrum available in the auction to provide AT&T a viable path to at least a 2×10 MHz nationwide spectrum footprint.
The industry is expecting approval for both deals – between Comcast and Time Warner and AT&T and DirecTV. Regulators are currently reviewing Comcast Corp’s proposed $45 billion takeover of Time Warner.
Vodafone deal to take back seat
AT&T has been trying to buy Vodafone Group plc of the U.K. Indications are that AT&T will not go ahead with its earlier plan to acquire Vodafone because of its commitments towards DirecTV and video plans.