- AT&T announced its plan and terms to acquire DIRECTV last year.
- The deal is expected to close this year, but still faces approval.
- This article looks at the value proposition if the acquisition goes through.
DirecTV: Taking Advantage Of Merger Uncertainty To Capture Value Using Options
- DirecTV is in the process of being acquired by AT&T.
- The merger is likely to close in the first half of 2015, but the outcome is still not 100% certain.
- This uncertainty provides an opportunity to capture value using mispriced DirecTV LEAPS call options.
- Selling out-of-the-money calls provides a different risk profile than being long DirecTV stock.
- DirecTV launches over-the-top video service aimed at U.S. Hispanic consumers.
- New service will boost DirecTV's revenues.
- However, given that the service is targeted for a niche market, Yaveo will have a little impact on DirecTV’s stock.
- The AT&T and DirecTV deal isn't set to be finalized until next year.
- AT&T is potentially the big bidder at the AWS-3 spectrum auction that could harm the valuation ultimately obtained by DirecTV shareholders when the deal closes.
- The domestic wireless pricing wars and wireless spectrum auctions continue to dilute the potential windfall for DirecTV shareholders.
- It is interesting that Warren Buffett reduced his stake in DirecTV during Q2, but increased it by 28% during Q3, after the announcement of the takeover by AT&T.
- This article calculates the profit for DTV shareholders for different moves in AT&T's stock price.
- The results show that there is significant profit to be made in the next six months, with great downside protection.
- DirecTV shareholders will start losing money only if AT&T declines more than 10%, i.e., below $30.
DirecTV Leads The 20 Best Value Bond Trades With Maturities Of 1 Year Or MoreDonald van Deventer • Dec. 18, 2014
- On December 16 in the U.S. corporate bond market, there were 18,644 trades in 3,032 issues of 969 issuers worth $5.1 billion in notional principal.
- We rank all bonds with at least $5 million in trading volume and maturities of one year or more by "best value," the ratio of credit spread to default probability.
- DirecTV Holdings led the ranking, with a ratio of 99 times, more than the 196 other bonds issues which met our criteria.
- DTV is not suitable for either Defensive Investors or Enterprising Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is undervalued at the present time.
- The market is implying 4.56% earnings growth over the next 7-10 years, which falls well below the rate the company has seen in recent years.
- The extension of the NFL Sunday Ticket removes the major hurdle to the acquisition of DirecTV by AT&T.
- The collar price of the offering reduces the prime impact up to the closing day.
- At this point, investors have limited downside and solid upside with a price target of $95 on closing of the deal.
- Univision, a Hispanic media supplier, has agreed with DirecTV (DTV) to supply its services to the satellite operator once it launches its internet delivered service.
- The services includes rights to Univision’s broadcast network, 2 local stations, cable channel Galavision. The service being provided by DirecTV is to be called YaVeo.
- There are a growing number of companies that are signing deals for similar online channels.
- The leading satellite television provider could increase its earnings targets following its pending merger with AT&T.
- DirecTV has reported some very strong results in the previous quarter, with earnings per share up by 35%.
DirecTV's Latin America Operations See Subscriber Growth, But Declining Currencies Stall ARPU GrowthTrefis • Sep. 16, 2014
- DirecTV, one of the largest pay-TV operators in Latin America with more than 12 million subscribers, has been growing at an average rate of 25% annually over the past few years.
- While the company has been consistently growing its subscriber base, depreciating regional currencies has stalled ARPU growth over the past few quarters.
- Given the currency trends in the region, we expect ARPU to continue to decline in the near term and stabilize in the medium to long run.
AT&T And DirecTV Merger Under Scrutiny - How Will It Affect Shareholders?
- Investigation is being carried out to cover the merger between AT&T and DirecTV on grounds that it will damage public interest by lowering competition.
- AT&T reported an increase in consolidated revenues of 1.6% which amounted to $32.6 billion in its second quarter results.
- The future guidance for the company is an increase in consolidated revenues by 5%, stable consolidated margins, and adjusted earnings per share at the low end of mid-single digit range.
- With all these concerns, investment doesn't seem like a good idea at this moment in the company.
DirecTV Offers Compelling Value For Income Investors
- The yield on cost of AT&T obtained by purchasing DirecTV at current price levels is very favorable.
- AT&T has not participated in the broad-based market rise over the past few years and can be considered undervalued.
- DirecTV and AT&T have made positive strides including a major negotiating point in the buyout terms.
Paulson Buys DirecTV As Buffett Sells: Why I'm Bullish
- Paulson & Co has taken a large stake in DirecTV while Berkshire has reduced its stake.
- AT&T has agreed to buy DirecTV for $95 per share but regulatory approval remains uncertain.
- I believe Paulson & Co's move to buy is more important than Berkshire's sale.
Here's Why AT&T Isn't Destined For Success With DirecTV
- AT&T offered to buy DirecTV after the stock rallied strong.
- DirecTV growth isn't the panacea projected.
- Bundled offerings aren't guaranteed to attract customers.
- DirecTV delivered again very good quarterly results, but the stock hasn't moved.
- The price reflects the fear that the AT&T merger might not be completed due to a potential exclusivity loss of the NFL Sunday Ticket or because of regulatory concerns.
- As I believe that the company will do fine even without merging, I consider the shares to be attractively priced.
- We pitch two companies from the broadcasting and cable TV sector, Comcast and DIRECTV, against one another in the latest instalment of our Head-To-Head series.
- The article focuses on the relative strengths and weaknesses of Comcast and DIRECTV based on business performance and sustainability/dividends/forecasts.
- It ends with discussion of the current valuations of the two companies, and details whether Comcast represents good relative value at current price levels.
DirecTV: Strategic Initiatives And Expansion Plans Key Factors In Earning A Bullish ThesisEquity Watch • Jul. 15, 2014
- Company’s strategic initiatives in the U.S. and infrastructure development and expansion in Latin America portend well for future performance.
- Increasing pay-TV penetration in Latin America will benefit DTV.
- DTV’s expense management efforts will remain important for margins and EPS growth.
U-verse Is The Regulatory Key To The Proposed AT&T/DirecTV Merger
- For the AT&T/DIRECTV merger to succeed, it likely will need to offer significant evidence that it will not slow its investment in new broadband deployment, particularly U-verse.
- AT&T is emphasizing its potential savings on programming savings.
- But regulators’ eyes are going to be on the potential CapX savings that could slow the country’s broadband deployment.
Should Investors Worry About The AT&T-DirecTV Deal?
- AT&T has made a $48.5 billion acquisition proposal to DirecTV.
- The move will help AT&T strengthen its bundled services and compete with Comcast.
- The proposed deal needs to receive a go-head signal from the FCC and the Department of Justice. The regulators are skeptical about big deals as they threat competition.
Jul. 8, 2014, 10:53 AM
- The FCC has named William Rogerson as part of the team that will review the Comcast (CMCSA)- Time Warner Cable (TWC) and AT&T (T) - DirecTV (DTV) mergers.
- Rogerson is considered a bit of a merger hawk after being a gadfly during the Comcast-NBCUniversal combination.
- Some analysts think the composition of the board as a whole will lead to a tough review process for the media giants.
Jul. 2, 2014, 12:49 PM
- Pay-TV operators (DISH, DTV, CHTR, CVC, TWC) will have to spend about $18.32 a month per subscriber within wo years to gain broad rights to sports content, according to estimates from SNL Kagan. That figure makes it difficult for the group to offer smaller bundles to bring back cord-cutters and lure cord-nevers.
- The major sports broadcasters (DIS, TWX, FOXA, CMCSA, CBS) only earned about $1.17 a month in 1995, despite lacking any competition from streaming or online services.
- Though the AT&T-DirecTV and Comcast-Time Warner Cable mergers could add leverage to the pay-TV side, new sports channels Fox Sport 1 and NBC Sports Network aim to achieve the must-have clout and high carriage fees earned by ESPN.
- Passing on costs might not be an option: Average revenue per user at pay-TV operators has hit a tipping point with consumers, with most analysts seeing the push-back continuing.
- "Something has to give," sums up media analyst Craig Moffett.
Jun. 18, 2014, 3:57 PM
- Dish Network (DISH) is reportedly interested in bidding for the NFL Sunday Ticket package if DirecTV (DTV) fails to nail down a contract renewal with the league.
- The NFL has some leverage in its negotiation with DirecTV with AT&T saying it's a deal killer if the NFL Sunday package isn't part of its acquisition of the company.
Jun. 5, 2014, 12:39 PM
- Progress between Time Warner Cable (TWC +0.6%) and DirecTV (DTV -0.1%) over a distribution deal for SportsNet LA has stalled, according to the L.A. Times.
- A deal with DirecTV is considered key because it's the only provider that competes directly with Cox, Verizon, Charter, and Dish Network. If DirecTV doesn't carry SportsNet the other Pay-TV providers can afford to wait on their own deals.
- What to watch: DirecTV claims it hasn't lost a significant number of subscribers even with the Los Angeles Dodgers baseball team 61 games into their season. Analysts think a spirited San Francisco Giants-L.A. Dodgers pennant race could increase pressure on DirecTV.
- Previous: Not even Vin Scully can catch a Dodgers game in L.A.
Jun. 4, 2014, 2:10 PM
- A day after AT&T (T -0.7%) sold $2B worth of 30-year U.S. bonds to help pay for the DirecTV (DTV -0.1%) deal, Bloomberg reports the company is selling $2.9B worth of euro-denominated bonds with 10 and 20-year maturities.
- Assuming no funds are used to repurchase debt, the offerings stand to raise AT&T's debt load to the ~$85B range. DirecTV, meanwhile, has $20.8B of its own debt, partly offset by $5B in cash/investments.
- Separately, in an 8-K outlining its case for the acquisition, AT&T declares content costs eat up 60% of U-verse's revenue, and that DirecTV's scale will lower those costs by ~20%. $1.6B/year worth of total synergies are expected 3 years after the deal closes.
- AT&T also claims the deal will allow it to provide gigabit fiber services (previous) to 2M more locations, and that it plans to offer TV/broadband bundles in Latin America with the help of DirecTV's spectrum, which covers 43M homes in Brazil, Argentina, Peru, and Colombia.
- Previous: AT&T/DirecTV hinges on Sunday Ticket
May. 29, 2014, 12:26 PM
- Newsmax TV announces it struck a distribution deal with DirecTV (DTV).
- The network aims to reach 40% of all U.S. cable and satellite homes by the end of the year.
- A soft launch on DirecTV is planned for the middle of June.
- Newsmax TV will attempt to challenge Fox News (FOXA) for audience along with One America News which will launch on AT&T's U-verse.
May. 29, 2014, 4:15 AM
- Sprint (S) Chairman Masayoshi Son reasons that the rise in telecom and cable mergers should allow his company to buy rival T-Mobile (TMUS). Three big mergers have taken place in recent months with Verizon (VZ) acquiring Vodafone (VOD) for $130B, Comcast (CMCSA) buying Time Warner Cable (TWC) for $45B, and the AT&T (T) purchase of DirecTV (DTV) for $49B.
- "Access to the Internet is currently dominated by three giants with no sizable competitor," says Son.
- Although the company has not yet made a formal bid on T-Mobile, it looks to lay the framework for a future purchase.
- Antitrust authorities have previously frowned on such a deal, as it would cut the number of national competitors in the wireless industry to three from four.
May. 19, 2014, 10:00 AM
- If DirecTV's (DTV -2.2%) NFL Sunday Ticket deal isn't renewed on terms similar to the ones discussed, AT&T (T -2.1%) can walk away from the deal, AT&T discloses in an 8-K. DirecTV CEO Mike White says he's confident Sunday Ticket will be renewed by year's end.
- "The last six years for AT&T have been about data, the future is about delivering video at scale," declares AT&T CEO Randall Stephenson. He states AT&T is only paying for 30% of the deal in cash to keep its powder dry. Among other things, Ma Bell plans to spend up to $9B at next year's huge low-frequency spectrum auction, and will also participate in an auction for higher-frequency AWS spectrum.
- Also: 1) AT&T plans to grow its grow its broadband footprint by 15M homes (largely in rural areas), in part by offering fixed wireless services. 2) White says DirecTV is looking for M&A opportunities in Latin America. 3) AT&T promises DirecTV's services "will continue to be available on a stand-alone basis at nationwide package prices that are the same for all customers" for 3 years. 4) Cost synergies are expected to total $1.6B/year.
- AT&T and DirecTV are both lower. DirecTV shareholders get 1.905 AT&T shares for each DirecTV share if AT&T trades below $34.90 at closing time, and 1.724 shares if it trades above $38.58. They get an equity payoff equal to $66.50/share if AT&T trades between those two figures.
- More on AT&T/DirecTV
May. 19, 2014, 1:56 AM
- AT&T (T) intends to sell its $6B, 8.4% holding in América Móvil (AMX) in order to avoid conflicts of interest from its proposed $48.5B acquisition of DirecTV (DTV) and "facilitate the regulatory approval process in Latin America."
- AT&T's representatives on América Móvil's board are set to resign.
- The deal will give AT&T a large presence in a region in which DirecTV has 18M customers, making it one of the largest pay-TV operators in Central and South America - along with América Móvil.
May. 18, 2014, 5:14 PM
- As anticipated, AT&T (T) confirms it's acquiring DirecTV (DTV) in a stock-and-cash deal amounting to $95/share ($28.50/share in cash), just short of $50B total.
- Both boards were unanimous in approving the transaction. The companies say it's accretive within 12 months after close, on free cash flow per share and adjusted EPS basis, and that they expect the deal will "pass muster" with regulators.
- Previous coverage
May. 17, 2014, 9:09 PM
- Bloomberg reports AT&T (T) aims to announce a DirecTV (DTV) deal by Monday. BuzzFeed reports AT&T is on track to make an announcement by Sunday. "The deal is done," says a source.
- Past reports put the deal's price around $50B; DirecTV closed with a market cap of $44B on Friday. The company also has a $20.8B debt load that needs to be accounted for, partly offset by $3B in cash and $2B in investments.
- Buying DirecTV would give AT&T 20.3M U.S. subs and 11.9M Latin American subs, plus a 41% stake in Mexican satellite TV provider Sky Mexico (6.1M subs) and access to the NFL's Sunday Ticket package.
- Though not cheap, the deal might make it easier for AT&T to keep supporting its hefty dividend (current yield of 5%). Oppenheimer thinks a 50/50 cash/stock deal at $100/share would lead AT&T to pay out only 55% of its 2016 free cash flow through dividends vs. 65% otherwise.
- More on AT&T/DirecTV
May. 14, 2014, 9:06 AM
- Oppenheimer says there is a "strong possibility" AT&T (T) will pull the trigger on a $100 bid for DirecTV (DTV).
- After crunching the numbers, the investment firm says a DirecTV integration would be accretive to AT&T's free cash flow per share by at least 7%.
- Though there has been a lot of talk from analysts about AT&T being able to increase its average monthly revenue per user through a DirecTV purchase, others note the real value could be on the content negotiation side where a DTV-T combination yields considerable leverage.
- DTV +0.3% premarket to $86.35.
May. 13, 2014, 11:00 AM
- Bloomberg and WSJ reports suggesting AT&T (T -1.3%) is close to a mega-deal for DirecTV (DTV +0.7%) (possibly worth over $66B after factoring net debt) are leading investors to bet Ma Bell won't be interested in making a bid for Vodafone (VOD -2.2%), something the company has been frequently rumored to be interested in exploring.
- AT&T CEO Randall Stephenson has already said "the window may be closing" on acquiring European assets, and has suggested he isn't thrilled with Vodafone's efforts to grow its wireline footprint via M&A.
- For his part, Vodafone CEO Vittorio Colao has hinted he's open to a deal, but has also made it clear his company will continue its wireline expansion strategy in the interim.
- AT&T, which didn't sell off following prior DirecTV reports, is off moderately today, as the Street expresses some concern over the potential $100/share price tag mentioned in Bloomberg's report.
- DirecTV (DTV +0.7%), meanwhile, has pared its AH gains and is now only trading near $88. Worries about regulatory approval might be playing a role; a Bloomberg source states AT&T and DirecTV are expecting a 12-month regulatory process for the deal.
May. 12, 2014, 5:49 PM
May. 12, 2014, 5:10 PM
- Bloomberg reports AT&T (T) is in "advanced talks" to acquire DirecTV (DTV) for ~$100/share - a 15% premium to DirecTV's Monday close, and a 29% premium to where shares traded before the WSJ's May 1 report about deal talks.
- The acquisition price values DirecTV at $51B, or over $66B after factoring net debt.
- Bloomberg adds that under discussed plans, DirecTV CEO Mike White plans to retire after 2015.
- DTV now +5.6% AH to $92.
- Earlier: AT&T/DirecTV deal could reportedly be announced in two weeks
May. 12, 2014, 4:32 PM
- 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
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