AT&T Inc plans to pay US$48.5 billion to buy DirecTV Group, in the latest sign that the wireless industry and the US television market are set to converge as customers consume more video on their mobile devices.
The deal, announced on Sunday, highlights AT&T’s pressing need for fresh avenues of growth beyond the maturing US cellular business, which has become increasingly competitive.
Consumer advocates are already putting pressure on US regulators to reject the deal.
“You can’t justify AT&T buying DirecTV by pointing at Comcast’s grab for Time Warner, because neither one is a good deal for consumers,” said Delara Derakhshani, policy counsel for the Consumers Union, the advocacy arm of Consumer Reports.
The combination with DirecTV, the No. 1 US satellite TV provider with 20 million customers, would beef up Dallas-based AT&T’s packages of cellular, broadband, TV and fixed-line phone services.
For DirecTV, the deal would enable it to offer broadband Internet for the first time to its US customers, filling a gap that had made the company vulnerable to cable rivals, which can provide an Internet service through their networks.
“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,” AT&T chief executive Randall Stephenson said during a conference call.
Stephenson’s counterpart at DirecTV, Mike White, is to stay on to run the satellite television business, which is to remain based outside Los Angeles in El Segundo, California.
AT&T offers a video service known as U-Verse. Stephenson said during a conference call that the company would 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 US$45 billion for Time Warner Cable Inc, a transaction that would create the leading US cable and broadband Internet provider. The Comcast proposal is pursuing regulatory approval.
AT&T is offering US$95 per DirecTV share in a combination of stock and cash, a 10 percent premium over Friday’s closing price of US$86.18. It plans to finance the cash portion, US$28.50 per share, with funds on hand, asset sales and financing already lined up, it said.
The transaction has a total value of US$67.1 billion, including the assumption of DirecTV’s net debt.
To help its case with regulators, AT&T said it would sell its 8 percent stake in Carlos Slim’s America Movil, worth about US$5 billion. DirecTV has about 18 million customers throughout Latin America.
AT&T said it expected to be able to add 15 million broadband customers, mostly in rural areas, within four years of the deal closing, adding to its base of 11 million Internet customers.
The latest deal will immediately ratchet up the pressure on competitors. In particular, it raises questions about the No. 2 satellite TV operator, Dish Network, and what it might do. With 14 million subscribers, Dish trails DirecTV and has spent billions for wireless spectrum it has yet to use.