AT&T nears deal for DirecTV

AT&T nears deal for DirecTV
Acquiring DirecTV would let AT&T shut down its much smaller U-Verse television service. (Larry W. Smith / European Pressphoto Agency)
AT&T is near a deal to acquire satellite broadcasting giant DirecTV.

The two companies, which have flirted in the past, are awaiting board approval on the transaction -- valued at close to $50 billion -- that would make telecommunications giant AT&T a major player in the pay-TV business.


An agreement could be reached as early as Sunday, confirmed a person close to the talks who requested anonymity because of the sensitivity of the matter. The two companies started talking this year, and the discussions have heated up in the last two weeks.

An AT&T spokesman declined to comment. DirecTV spokespeople did not return requests for comment.
With more than 20 million subscribers in America, DirecTV is the second-largest pay-TV provider, behind Comcast Corp. A deal with AT&T would give the El Segundo company the one thing it is missing: the ability to seamlessly package phone and Internet service the way cable companies do.
For AT&T, acquiring DirecTV would give it the opportunity to shut down its much smaller U-Verse television service, which it delivers through its fiber lines. Such a move would let AT&T use DirecTV for television service and free up AT&T's fiber lines to increase broadband speeds to U-Verse customers.

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.

An AT&T-DirecTV deal would raise further concerns about consolidation in the media and telecommunications space.

Just a few months ago, Comcast reached an agreement to acquire Time Warner Cable Inc. for about $45 billion. That deal -- which has yet to be approved by federal regulators -- would give Comcast about 30 million customers and a dominant position in both pay TV and broadband in the nation’s largest markets, including Los Angeles, New York, Chicago, Philadelphia and Dallas.

Media watchdogs and consumer activists, already worried about Comcast and Time Warner Cable combining, probably would try to derail an AT&T-DirecTV deal as well.

"The continued centralization of control over our nation's media and communications industries is nothing more than a recipe for disaster," Derek Turner, research director of the media reform group Free Press, said in an interview this month.

Some analysts have questioned whether an AT&T-DirecTV pairing makes sense.
“Like any merger born of necessity rather than opportunity, the combination of AT&T and DirecTV calls to mind images of lifeboats and rescues at sea,” telecommunications analyst Craig Moffett of MoffettNathanson Research wrote this week.

AT&T, Moffett wrote, is in "dire need of a cash producer to sustain their dividend." However, Moffett is not sure now is a good time for AT&T to try to be a bigger player in television.

The latest developments on the talks were first reported by BuzzFeed.