AT&T has announced it will acquire satellite broadcaster DirecTV for almost $50 billion.
The deal, which has been approved by the boards of directors at both companies, will see Dallas-based AT&T take on DirecTV’s service alongside its 38 million subscribers and access to an additional 70 million homes in new markets across North America. It will also allow AT&T to more effectively compete with the ‘bundles’ of services put together by cable TV providers, helping them lure customers away from the likes of Comcast and Time Warner.
“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,” AT&T CEO and Chairman Randall Stephenson said in a joint statement announcing the acquisition.
“DirecTV is the best option for us because they have the premier brand in pay TV, the best content relationships, and a fast-growing Latin American business.”
Currently, AT&T’s only television option is AT&T U-Verse, which delivers live television to customers using their AT&T internet connection. By acquiring the largest satellite television provider in North America, it opens up countless new content opportunities for the company.
DirecTV is also incredibly popular in Latin America, where middle-class Latin Americans make up both DirecTV’s largest and fastest-growing customer segments with over 18 million subscribers in the region.
The satellite broadcaster also owns a bevy of exclusive broadcasting rights, particularly for sporting events, as well as major stakes in the MLB Network, the NHL Network, and the Sundance channel.
The deal also has the added bonus of pushing AT&T’s U-Verse subscribers over to DirecTV’s satellite service, which they hope will ease the bandwidth problems that have been arisen on many ISP networks recently.
When the deal closes, DirecTV shareholders will receive $95 per share, which works out to a total equity value of $48.5 billion. When DirecTV’s debt is rolled in, the total value of the transaction will be $67.1 billion. A small price to pay to create a new multi-platform content delivery leader. Also, DirecTV’s ample free cash flow -$2.6 billion in 2013- surely sweetened the deal.
AT&T plans to begin bundling services as soon as the deal closes. However, they have confirmed their services will still be available ‘unbundled’ for at lead three years after the deal closes.