AT&T Set Up To Take On Verizon With Impending Acquisition Of DirecTV


AT&T has an agreement in place to buy DirecTV in a whopping $48.5 billion deal, a move that analysts said allows it to take on Verizon.

The acquisition that was revealed by the company on Sunday makes AT&T a three-headed monster to rivals as it can now offer video, broadband and mobile services to an enormously expanded customer base through AT&T’s 2,300 retail stores and thousands of resellers of both companies across the country. AT&T's broadband network will cover 70 million customer locations if the deal is finalized.

"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," said AT&T Chairman and CEO Randall Stephenson in a statement. “DirecTV's a great fit with AT&T, and together we'll be able to enhance innovation and provide customers new competitive choices for what they want in mobile, video and broadband services. We look forward to welcoming DirecTV's talented people to the AT&T family."

[Related: AT&T Pumps $300M Into New Partner Financing Program, Other Channel Resources]

If the deal goes through it would make AT&T a stronger competitor as it is now set up to be able to take on one of the biggest providers in the space, said Jack Gold, president and principal analyst at J. Gold Associates, a Northborough, Mass.-based consulting firm.

"AT&T has got its eyes focused on what Verizon is doing," he said. "Verizon already has multiplay capabilities, especially in video. DirecTV gives AT&T a way to compete with Verizon in a video play that they didn't have before.”

Gold sees a continued growth in AT&T’s markets if the deal closes.

"The bottom line is, 'How can I increase my revenue,'" he said. "The deal gives AT&T more reach as DirecTV delivers to areas that AT&T isn't that strong. AT&T can offer bundled services across the board. It's a way for AT&T to try to expand their market.”

The announcement comes after Comcast shook hands with Time Warner Cable in a $45 billion acquisition agreement three months ago, but because the majority market share Comcast would command, government stipulations have remained a hurdle in terms of the deal going through. Gold believes AT&T will not experience the same kind of hurdles.

DirecTV stockholders will receive $95.00 per share made up of $28.50 per share in cash and $66.50 per share in AT&T stock. The total value of the deal is $67.1 billion, including the DirecTV debt that AT&T will take on.

PUBLISHED MAY 19, 2014