AT&T and DirecTV Enter $48 Billion Merger

Telecoms company AT&T announced a deal to take over DirecTV, the US's largest satellite broadcaster yesterday in the latest in a series of media and telecoms deals that have rattled consumer groups and attracted regulatory scrutiny.

AT&T, the second-largest wireless provider, confirmed that it is paying $49bn to takeover DirecTV in a deal that will makes it a major player in the pay-TV business.

With more than 20 million subscribers in the US and 18 million more in Latin America, DirecTV is the second-largest pay-TV provider behind Comcast, which is currently negotiating the takeover of its second biggest cable rival, Time Warner Cable (TWC).

Should the two deals be approved, the telecoms, television and internet accounts of 56m Americans will be controlled by just two companies. AT&T's merger with DirecTV would create a company with 26m pay-TV subscribers compared to 30m at Comcast and TWC, if regulators approve their deal.

A deal with AT&T would give DirecTV the ability to package phone and internet service the way cable companies do. AT&T already runs a television service, U-Verse, but with 5.7 million customers it is tiny in comparison to DirecTV. Randall Stephenson, AT&T chairman and CEO, said he was also attracted to the deal by DirecTV's strong presence in Latin America.

Stephenson said: "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."

"This compelling and complementary combination will bring significant benefits to all consumers, shareholders and DirecTV employees," said Mike White, president and CEO of DirecTV.

The deal is bound to spark regulatory scrutiny. The Federal Communications Commission (FCC) is already examining Comcast and TWC's proposed merger, which has sparked widespread protests from consumer groups concerned about further loss of competition in an already consolidated industry.

Craig Aaron, president of the open-internet advocacy group Free Press, said: "The captains of our communications industry have clearly run out of ideas. Instead of innovating and investing in their networks, companies like AT&T and Comcast are simply buying up the competition. These takeovers are expensive, and consumers end up footing the bill for merger mania.

"For the amount of money and debt AT&T and Comcast are collectively shelling out for their respective mega-deals, they could deploy super-fast gigabit fibre broadband service to every single home in America. This is not about providing better services or even connecting more Americans. It's about eliminating the last shred of competition in a communications sector that's already dominated by too few players."

AT&T has been looking for deals since a $39bn takeover of T-Mobile was blocked in 2011, on the grounds it would overly concentrate the wireless industry. The company had been expected to make a bid for the UK's Vodafone but appears to have shifted its focus after the announcement of the Comcast/TWC deal. In March Stephenson called that merger an "industry-redefining deal" and said AT&T would react by concentrating investment in its high-speed cable delivery services.

There was also some skepticism on the deal from Wall Street. Writing before Sunday's news Craig Moffett, an analyst at MoffettNathanson Research, wrote: "Like any merger born of necessity rather than opportunity, the combination of AT&T and DirecTV calls to mind images of lifeboats and rescues at sea."

AT&T will pay $95 per share for DirecTV, with about $66.50 coming in the form of its own shares and $28.50 in cash. On Friday DirecTV's shares finished trading at $86.18.

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