After maybe a month’s worth of rumors, AT&T made it all official that it was going to make sweet financial love to DirecTV. But what brought about this telecommunications liaison, between a company that sells access to copper wire and a company that blasts you TV via a satellite?
Who are the players here?
DirecTV is a satellite television and internet provider, as well as a constant antagonist of the Weather Channel. It’s got about 35 million subscribers. AT&T is the biggest provider of landlines on Earth, a major mobile company, a broadband provider, a TV provider… look, basically if you can send it over a wire or a fiber, or via a radio to a phone, AT&T has something to do with it on some level or another.
So how much is DirecTV worth, according to American Telegraph and Telephone?
A cool $48.5 billion in cash and stock.
Wait, isn’t DirecTV kind of a competitor with AT&T?
Sort of, in the sense that they were technically competing over television customers and technically satellite and broadband compete for Internet users. In reality, they were in fairly separate parts of the industry.
So why did AT&T do this?
Mostly because they’re desperate. Comcast and Time Warner’s merger is probably not going to happen, but the spectre of another company controlling 30% of cable-watching households is enough to scare the crap out of anybody. AT&T can just spend billions to feel better.
Also not helping matters is the ever-rising costs of retransmission fees. The more subscribers you have, the more leverage you have to tell networks to get stuffed when they demand you give them more money to broadcast their network.
Is this merger going to actually be allowed to happen?
Oh, totally. Unlike Time Warner and Comcast, where you can make a fairly good argument that the merger is decidedly not in the public interest, these are two entirely different companies catering to entirely different sectors of the market. It’s not going to pass without comment, but it doesn’t seem likely it won’t get the green light.
Is this the last telecommunications merger we’re going to see?
Not even close. Expect Cablevision, Cox, Charter, and other cable operators to try and merge all throughout the year. Especially now that the market appears to be a matter of growing or dying, expect cable companies to choose the former if they can.