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WSJ: AT&T/DirecTV deal could be announced in two weeks

  • The WSJ reports AT&T (T) and DirecTV (DTV) are discussing a cash/stock deal that could be announced in as soon as two weeks.
  • The paper adds adds AT&T is likely to pay a premium to Dish's current stock price.
  • Though a merger would be costly - DirecTV currently goes for over 17x 2015E EPS after factoring over $15B in net debt - AT&T investors have been signaling they aren't bothered by a deal that stands to increase AT&T's bundling opportunities, while also lower the telco's exposure to both its slumping wireline voice ops and a mobile business that's beginning to see tougher price competition.
  • DTV +1.5% AH
  • Last week: DirecTV reportedly talking with advisers about AT&T deal
Comments (8)
  • duhaus
    , contributor
    Comments (320) | Send Message
     
    With market saturation and competition diversification with new revenue streams will be key for the big Telecom companies so I'm for this deal. Long T
    12 May, 04:54 PM Reply Like
  • King Rat
    , contributor
    Comments (724) | Send Message
     
    DirecTV is the only available alternative to cable for my stateside family that does not use AT&T mobile.
    Something gives me a gut feeling that unless my family switches to AT&T mobile, this would only make DirecTV more expensive and less of an alternative.

     

    Bundling phone, internet, and TV into one service is a great deal... for the provider. It is like bundling your right arm, left arm, and head in the same yoke.
    12 May, 04:59 PM Reply Like
  • dsw0115
    , contributor
    Comments (21) | Send Message
     
    I'm curious in my area of the country Verizon partners with DirecTV for TV service. If this deal goes through, then what will happen with that partnership?
    12 May, 05:38 PM Reply Like
  • JillKennedy
    , contributor
    Comments (78) | Send Message
     
    The great media bloodbath of 2014 continues:
    :http://bit.ly/L3Fls0
    12 May, 06:01 PM Reply Like
  • LMinAppleton
    , contributor
    Comments (42) | Send Message
     
    I'm not sure I see the benefits of AT&T buying DirecTV--they seem to be buying a TV provider for a high price (1.4 X sales and 17 X earnings, assuming the premium is already built into today's closing DTV price (which it probably isn't)) which will be a competing product with U-verse TV in all U-verse markets (DTV is a satellite service that covers the entire country). Perhaps DTV's Latin American operations could add value for T.

     

    DTV's investor web page indicates that the average U.S. subscriber spends $100.16 (plus tax) per month--for that kind of money I can buy a damn nice Sony 42" HDTV every seven months. The average subscriber watches 17 channels but pays for all the channels not watched. I watch very little TV but I do subscribe to Hulu Plus for $7.99 (plus no tax) per month. Although Hulu does not offer everything available in the world, I can always find something to watch on my computer or through my Blu-ray on the TV--when I want it.

     

    Given the outrageous subscription prices these days for cable/satellite TV, I fail to see where this is a growth industry; perhaps in the near-term but with so much entertainment content available through the internet I feel the days of cable/satellite are numbered at the prices charged. I might feel differently if cable/satellite channels were priced a la carte--but this would probably significantly cut into cable/satellite providers' revenues and profits.

     

    I am long T and enjoy the high dividend but, long term, I don't see how this deal is good for T stockholders.

     

    If anyone has a differing opinion, I would enjoy hearing your reasoning.
    12 May, 09:38 PM Reply Like
  • InmanRoshi
    , contributor
    Comments (212) | Send Message
     
    A couple of points to consider....

     

    Despite all the media narratives and warnings about cord cutting for years, the fact remains that we've seen no real threat of it in the bottomlines of the major media conglomerates. PayTV is still, and will for the ever forseeable future, a gigantic cash cow. Much like the movie industry, Pay TV seems to be immune or have adapted to the threats of internet. Look at DTV's balance sheet, they are a FCF generation machine. Many times internet and VoiP are thrown into bundles as loss leaders to gain the high growth margin TV service.

     

    Look at AT&T Uverse coverage map. There are still huge swaths of the country that AT&T can't penetrate, particularly in high population areas along the north east.

     

    http://bit.ly/QCvFqe

     

    They've admitted they've tapped out coverage expansion.

     

    http://bit.ly/QCvHOS

     

    DTV provides T with a foot in the door to millions of homes that are otherwise inacessible, and from there T can bundle in all sorts of other products.

     

    Also, the Latin Market can not be easily dismissed, because the is a gigantic moat with little competition and the market is basically untapped. They're just scratching the surface there.
    12 May, 10:03 PM Reply Like
  • LMinAppleton
    , contributor
    Comments (42) | Send Message
     
    InmanRoshi: Thanks for the reply. I think you make a couple of valid points--certainly food for thought.
    13 May, 11:25 AM Reply Like
  • Ruffdog
    , contributor
    Comments (1626) | Send Message
     
    "Bundling phone, internet, and TV into one service is a great deal... for the provider." I am in an area where U-verse is not available so T gives me DirecTV. DirecTV customer service is worst than T. If they merge I will only have to deal with one service, I hope!
    13 May, 10:24 AM Reply Like
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