AT&T acquires satellite broadcaster DirecTV for a whopping $49 Billion

26 Jul 2015 | Author: | No comments yet »

AT&T exec in charge of DirecTV, talks branding, rates, Net neutrality.

AT&T Inc’s US$49 billion acquisition of satellite broadcaster DirecTV Inc won final regulatory approval on Friday, clearing the way for a new powerhouse in broadband and video services. WASHINGTON–The “very different company” executives at Dallas-based AT&T have been promising by the end of 2015 took a very big step toward reality Friday as the Federal Communication Commission approved its acquisition of DirecTV satellite video company.NEW YORK — Even as TV watchers increasingly go online, AT&T has become the country’s biggest traditional TV provider with its $48.5 billion purchase of DirecTV.

The merger puts AT&T’s John Stankey in a new role as CEO of AT&T Entertainment & Internet Services, where he will run both DIRECTV and AT&T’s home solutions operations.Just a couple of days after the DoJ said the deal could go through and FCC Commissioner Tom Wheeler recommend its approval, the FCC voted to make the $49 billion AT&T / DirecTV combo official — with a few conditions. The US Federal Communications Commission (FCC) said it approved the plan, announced last year, with conditions drawn up to ensure competition and more deployment of high-speed Internet connections. The vote took place Friday and will become legal binding once the FCC issues its final order, which includes a number of conditions that the AT&T will have to abide by after the deal closes.

The panel’s blessing came one year after AT&T petitioned for government approval — a long slog, but one that lacked the public rancor that doomed another proposed merger: Comcast and Time Warner Cable. As we’d heard, the approval comes with strings (in place for four years) including a requirement AT&T expand its fiber network, hook up gigabit internet to eligible schools and libraries and provide affordable standalone internet for low-income customers in its service areas. Earlier this week, FCC Chairman Tom Wheeler said he had circulated an order approving the mega-deal and the US Department of Justice said it would not block the merger. At least three of the five FCC commissioners have voted in favor of the deal with conditions, according to the sources, who spoke anonymously because the votes have not yet been made public.

The company said it will serve more than 26 million U.S. customers and more than 19 million in Latin America, making it the world’s biggest pay-TV company. The FCC’s vote, likely to be completed and announced on Friday, was the last regulatory step toward the completion of the merger between the second-largest U.S. wireless carrier and the largest satellite-TV provider.

It brings AT&T nearly 40 million new customers who buy satellite TV service from DirecTV, a total that dwarfs AT&T’s struggling efforts to build its own video business through its U-verse offering. In a key condition to win approval, AT&T agreed to dramatically expand its high-speed fiber optic broadband network and upgrade Internet connections to schools and public libraries. The requirements from the FCC, which ensures that deals are in the public interest, include protections for rival video and pledges to expand high-speed Internet services to schools, low-income Americans and other customers. Those deals, announced this spring, have a combined value of $67 billion and would catapult Charter into the third-largest pay-TV provider in the nation, behind AT&T and Comcast. Nobody else has the kind of toolset (and) breath that we now have–scaled content, world class mobile network, broadband network, the technical compatibilities to take all that out over an IP infrastructure.

As the U.S. wireless market reaches saturation, AT&T hopes to tap into DirecTV’s business and has been expanding its footprint in Mexico after buying the third and fourth largest wireless carriers in that country recently. However, merging AT&T and DirecTV could help competition, because the telecom giant and satellite broadcaster do not have the same geographical territories as the traditional cable firms. The AT&T deal did not spur the same fears from consumer groups because the firm would not contain an entertainment unit like Comcast’s NBCUniversal and would not gain Internet users, considered the future of the industry, by buying DirecTV.

In addition, AT&T will be required to offer an inexpensive Internet plan for low-income residents. “For our goal of universal broadband access to be realized, we need both universal deployment of networks and access to affordable services,” FCC Commissioner Mignon L. The FCC repeated Friday that it had set certain requirements for the merger, which it had disclosed on Tuesday when the head of the agency announced his support for the deal.

And then there’s the basic blocking and tackling thrust (to take) two big companies and get the benefits of being able to leverage product distribution. DirecTV’s satellite TV business was hit by stagnation affecting the broad pay-TV market as viewers increasingly shift to watching videos on mobile devices. Clyburn said in a statement. “This merger makes strides in achieving both of these goals.” Integration of the two companies is expected to take several months. TL;DR version: No Sunday Ticket for U-verse, your current plans, channels and pricing won’t change, but new cross-bundles are coming soon. · Fiber to the Premises (FTTP) Deployment. Recognizing that the merger reduces AT&T-DIRECTV’s incentive to deploy FTTP service, the Commission adopts as a condition of this merger the expansion of FTTP service to 12.5 million customer locations.

Video companies Netflix Inc. and Dish Network Corp., traffic company Cogent Communications Holdings Inc and others had fought for the FCC to reject the $45 billion Comcast merger, but took a more lenient tack with AT&T. AT&T said that another executive, John Stankey, would become chief executive of the newly formed AT&T Entertainment and Internet Services, with responsibilities over DirecTV and AT&T Home Solutions operations. The companies pushed for limitations to AT&T’s power to slow down or charge fees for the web traffic traveling through its networks, as well as protections for competing video services. The issues are addressed by the FCC’s conditions with requirements for AT&T to count its own affiliated video services toward any data caps on fixed broadband connections and to share with the FCC all traffic exchange agreements it strikes with content and web transit companies.

And you should probably expect weeks (from now) you’re going to start to see things in the market that will represent the integration and togetherness of those products. I’m not going to tell you today what the price is and what those products are but they will be out there and I think you’ll be surprised by how fast we move out there.

In that case, government regulators worried that Comcast, already the largest Internet service provider, would have too tight a grip on the nation’s Internet infrastructure, providing service to more than half the nation’s high-speed Internet subscribers. The merger also gives AT&T greater reach into Latin America, where DirecTV has a significant presence with ownership interests in satellite TV companies that serve Argentina, Venezuela, Mexico, Brazil and other countries.

We think Title II is a regulatory overreach and it adds a degree of uncertainty into an investment marketplace (when the) FCC at any time can choose to reach in and reset the rules or regulate price or change performance metrics that create problems for consistency in business models. But we also want that ability so that we can go start working with the people who have the really attractive content to build these new distribution models. If you’re talking about 26 million homes that buy video — traditional linear video — and 100 million high quality handsets and customers that are out there, many of whom have smartphones, that’s a whole other opportunity to distribute content. That will allow us to do something with these guys that others who don’t have this whole set of vertically integrated capabilities—home broadband, mobile, great TV product, etc. — can do.

So the vast majority of folks are going to have more than enough work to do over the next several months and years to get this business operating right, aside from some of the corporate overheads that we’re going to have to manage through.

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