AT&T closed its $49 billion acquisition to buy DirecTV on July 24th. This merger was in the pipeline for over a year which results in making AT&T the biggest pay TV provider in the U.S. with more than 26 million users. The deal was closed by both boards on Sunday, after it was approved by the Federal Communications Commission. With the rise of wireless technology and online entertainment, the cable and satellite providers are adding new product options and generating more revenue per customer to gratify shareholders. AT&T had to make some concession in order to gain the federal approval, relevant to their broadband services and net neutrality.
According to the deal each shareholder will be paid $95. The net worth of the transaction is $67.1 billion, inclusive of DirecTV’s debt. According to the deal, if AT&T stock’s closing price is below $34.90 or 1.724, DirecTV shareholders will receive 1.905. And if their closing price is between $34.90-$38.58, the shareholders at DirecTV will receive AT&T’s stock between 1.724-1.905 shares, which sums up to $66.50.
The merged company will be capable of offering a ‘quadruple-play’ bundle which includes mobile and fixed-line phone service, high speed internet, and TV. The merged company will be the only provider in the whole country to offer this bundle. Other than gaining more customers through this bundle offer, the majority of DirecTV’s customers will shift to AT&Ts’ mobile services.
To get the job done, AT&T had to make some concessions for the FCC. One of the mandated conditions is that the company will provide 12.5 million users with its high-speed gigabit optic fiber. The company is expected to offer discounted broadband service to low-income houses and better quality broadband service to the libraries and schools. The benchmark set by FCC for the broadband speed is 25 mbps.
The deal enables AT&T to become the largest distributors of many mediums of entertainment across the country.
“We’ll now be able to meet consumers’ future entertainment preference, whether they want traditional TV service with premier programming, their favorite content on a mobile device, or video streamed over the Internet to any screen,” said AT&T CEO Randall Stephenson in a statement.
AT&T will be expanding their business throughout Latin America. Previously, DirecTV was the major service provider in Latin America. Latin America is a huge market base for them as 40% of the population is middle or lower class and has availed pay TV services.
This merger makes AT&T comparable with the television $45 billion giant Comcast which is making deals with Time Warner Cable for merger. This merger will make AT&T the largest entertainment distributor in the USA.
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Bryan Tropeano is a senior producer and a regular reporter for NewsWatch. He lives in Washington D.C. and loves all things Tech.