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AT&T seals $48.5bn DirecTV buy-out

US telecoms giant AT&T has agreed to buy DirecTV, the country’s largest satellite TV provider, for US$48.5bn.

Under the agreement, plans for which emerged last week, AT&T will pay DirecTV shareholders US$95 per share. It will also take on DirecTV debt, putting the total value of the transaction at US$67.1bn.

AT&T, the country’s second-largest wireless carrier, has already branched out into the pay TV business with the launch of IPTV play U-Verse, but DirecTV hands the company 20 million DTH subscribers in the US and 17 million in Latin America.

The boards of directors at both firms have approved the merger but it is still subject to approval by DirecTV shareholders, and needs to be reviewed by US regulators, including the Federal Communications Commission and the Department of Justice.

AT&T CEO Randall Stephenson said the deal allowed the company to fulfil a long-held ambition of being able 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.”

Stephenson’s counterpart at DirecTV, Mike White, will stay on to run the firm, which will continue to be based outside of LA. Both companies are hopeful the transaction will complete in about 12 months.

AT&T attempted a takeover of rival wireless carrier T-Mobile in 2011 but this failed because of resistance from regulators.

In the last 12 months, it has been looking to expand in Europe and considered an acquisition of Vodafone, which sold its stake in Verizon Wireless back to AT&T rival Verizon Communications for US$130bn in February.

In the same month, US cable and programming giant Comcast agreed to buy Time Warner Cable for about US$45bn, a proposed merger of the nation’s two largest cablecos.

“If the Comcast/Time Warner Cable and a DirecTV/AT&T merger becomes reality, a radical shift in the pay TV landscape would be well underway,” IHS analysts Erik Brannon and Harold Vargas said in a research note today.

“For the industry, the ramifications are centered around carriage fees and retransmission fees and further consolidation. The combined companies would be the largest operators in the business, and would be able to leverage their size, enjoying the opportunity for significant programme cost savings.

“That may leave the rest of the pay TV operators to bear the brunt of network retransmission fees as owners look to secure carriage fee increases elsewhere,” the analysts noted.

“If both mega mergers go through, the two combined entities would control more than 55% of the pay TV market. As a result, the network owners may look to offset any potential losses in carriage fee gains by increasing the rates more for the rest of the operators, potentially leading to further consolidation,” they added.





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