AT&T and DirecTV: a new force in the US television industry

May 18, 2014
May 18, 2014

AT&T just confirmed it has agreed to buy satellite TV business DirecTV for $48.5 billion (or $67.1 billion when you include the debt it will assume as part of the deal).

Assuming regulators approve the deal, that will make America’s oldest telecommunications company, founded in 1885, a serious force in the country’s television industry. DirecTV has around 20 million pay-TV customers in the US and a national footprint. AT&T has its own, much smaller service, U-Verse TV. Together they will have about 26 million video customers, the Wall Street Journal reports (paywall). That will make them the biggest force in pay TV, in terms of subscribers, after the company that will be formed if a merger between Comcast and Time Warner Cable, agreed in February, goes ahead.

The deal would also make AT&T a force in Latin America, where DirecTV has a sizable share of several pay-TV markets. In the US, at least, AT&T is expected to bundle DirecTV’s video packages in with AT&T’s own mobile and fixed-line broadband and telephone services.

It’s no coincidence that the deal follows the proposed Comcast-TWC merger, which is likewise awaiting the regulators’ green light. The more scale pay TV businesses have, the more power they have in negotiations with content owners. America’s fragmented TV landscape and escalating content costs are one of the reasons why pay TV bills seem to be always rising.

But so much consolidation in America’s communications landscape is making some people nervous (consider the fierce opposition from Netflix and others to the Comcast-TWC tie-up). So AT&T outlined a number of pledges in order to get regulatory blessing for the transaction. They include promises to upgrade high-speed broadband services for 15 million customers, mainly in rural areas; to offer broadband on a standalone basis; and to offer nationwide pricing on DirecTV packages for at least three years.

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