AT&T is in discussions to buy DirecTV for about $50 billion to expand its video offerings and avoid being left out in consolidation hitting the pay-TV industry.
The price being discussed by the companies is in the “low-to-mid $90s” per DirecTV share, but an announcement could still be “weeks away,” according to a person familiar with the talks. The person was not authorized to discuss the talks and would not be identified.
Shares of DirecTV rose 6% in after-hours trading Monday to $92.35, valuing the nation’s largest satellite-TV provider at about $47 billion. DirecTV shares have been rising steadily since The Wall Street Journal first reported their talks on April 30.
Their negotiation follows a deal struck earlier this year by Comcast to buy Time Warner Cable for about $45 billion, a transaction that would merge the nation’s two largest cable companies.
AT&T offers pay-TV service through its U-Verse brand, but its market reach is limited and DirecTV would broaden its footprint nationally.
Based in El Segundo, Calif., DirecTV had $8.6 billion in revenue last year and provides satellite-TV service to about 20 million subscribers in the U.S. and 17 million in AT&T’s U-Verse, which uses fiber optic lines to move data and video traffic, had 11.3 million customers in the first quarter, including 5.7 million TV subscribers. Its revenue from residential customers rose 4.3% to $5.7 billion in the first quarter, the strongest rate of growth since the introduction of U-verse eight years ago.
“To roll out fiber across their (AT&T) entire footprint is hugely expensive,” said Michael Paxton, a cable industry analyst for SNL Kagan. “I don’t expect them to have fiber everywhere. Theoretically, the AT&T-DirecTV linkup would vastly improve their video footprint and as significant as the Comcast-TWC, particularly on video. (The deal) is a response to demand for more video.”
With consumer groups loudly opposing media industry consolidation, AT&T and DirecTV could face regulatory roadblocks. But their tie-up may stand “a better chance than the Comcast-Time Warner Cable deal,” said Jimmy Schaeffler, an industry analyst at The Carmel Group.
“But it’s not as logical,” he said. “You would be paying for two infrastructures and merging two different types of technologies. It is a strange land in telecommunications right now.”