BURBANK — The nation’s biggest phone company is about to become a giant in pay television.
AT&T Inc. reached an agreement to acquire satellite broadcaster DirecTV in a deal valued at about $48.5 billion, the two companies said Sunday.
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, said AT&T Chairman and Chief Executive Randall Stephenson.
DirecTV Chief Executive Mike White said, This compelling and complementary combination will bring significant benefits to all consumers, shareholders and DirecTV employees.
Under the terms of the purchase, AT&T would pay $95 a share in cash and stock for DirecTV.
The sale comes just three months after cable giant Comcast Corp. said it was acquiring Time Warner Cable for $45 billion and could spark even further consolidation.
Media watchdogs and consumer activists, already critical of Comcast’s proposed takeover of Time Warner Cable, instantly blasted the AT&T-DirecTV news.
“The captains of our communications industry have clearly run out of ideas, said Craig Aaron, president of the media reform organization Free Press. 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.
AT&T and DirecTV have had on-again-off-again flirtations about combining for years, and it was an open secret in media circles that DirecTV and White were open to an an exit strategy.
Soon after Comcast unveiled its plans to buy Time Warner Cable, AT&T reignited talks with DirecTV. The deal came together quickly, with both companies forming due diligence teams. Lawyers for both sides also researched the hurdles and scrutiny the sale would face from lawmakers and regulators.
If approved, the deal would potentially solve significant challenges facing AT&T and DirecTV.
For El Segundo-based DirecTV, which has more than 20 million subscribers around the country, being tied to AT&T would enable it to seamlessly package its television and high-speed Internet services. One of DirecTV’s shortcomings in the fight for customers is its lack of a broadband service.
A combined AT&T and DirecTV could face off against Comcast, which has spent billions improving its broadband offering and is acquiring Time Warner Cable with an eye toward creating a nationwide cable and broadband behemoth.
By acquiring DirecTV, AT&T could shut down its much smaller U-Verse television service, which it delivers through its fiber lines. Doing that would enable AT&T to use DirecTV for television service and free up its fiber lines to increase broadband speeds to U-Verse customers.
There could be a backlash to winding down U-Verse as it would remove a competitor from the pay-TV arena.
The industry needs more competition, not more mergers, said John Bergmayer, a senior staff attorney at Public Knowledge. We’ll have to analyze this carefully for potential harms both to the video programming and the wireless markets.
Another reason DirecTV appeals to AT&T is the cash it generates. In 2013 the company posted $8 billion in profit on $32 billion in revenue.
DirecTV said it will keep its headquarters in El Segundo after the deal closes. The satellite broadcaster has 3,000 employees there.
Source: LA Times