Following weeks of rumors, AT&T over the weekend announced plans to acquire satellite television provider DirecTV for nearly $49 billion in stock and cash – and the assumption of more than $15 billion of debt. The move, if approved by regulators, would bolster the telecom giant’s pay-television business and allow for more thorough bundling of services.
News surfaced last week that AT&T was looking to pick up DirecTV in a move to boost its home entertainment offerings and better compete against planned consolidation in the cable television space tied to Comcast’s efforts to acquire Time Warner Cable.
According to terms of the deal, AT&T will pay $95 per share for DirecTV, with $28.50 in cash and $66.50 in AT&T stock for a total cash value of $48.5 billion. AT&T added that it will also assume approximately $18.8 billion in DirecTV debt. Financing of the deal will come from “cash on hand, sale of non-core assets, committed financing facilities and opportunistic debt market transactions.” Both companies’ board of directors approved the deal.
AT&T said the deal will become accretive in free cash flow and adjusted earnings per share within 12 months of closing, and that it expects to generate more than $1.6 billion in cost savings per year between the two operations within three years of closing.
AT&T claims the deal will bolster its ability to offer video content across multiple platforms, with DirecTV increasing the company’s pay-TV presence that it currently based on its U-verse fiber product. DirecTV counted just over 20 million pay-TV customers at the end of the first quarter, while AT&T said it had just over 11 million subscribers to its U-verse broadband and pay-TV offer.
DirecTV also counts more than 18 million customers across Latin America, with AT&T noting the regions pay-TV segment is under penetrated at just 40%. To help gain regulatory approval in Latin America, AT&T said it would divest its interest in América Móvil, which operates across a number of Latin American countries and also owns domestic wireless re-seller TracFone Wireless.
Domestically, AT&T said that if approved, it will commit to expanding broadband coverage to 15 million rural homes; continue to offer a stand-alone broadband service providing at least six megabits per second speed “where feasible” in current markets at a fixed priced for three years; continue offering a stand-alone DirecTV service for at least three years; and continue its commitment to net neutrality efforts.
More importantly for the wireless industry, AT&T said it remains committed to spending at least $9 billion in the government’s planned 600 MHz incentive auction scheduled for next year if there is sufficient spectrum made available for a nationwide 20 megahertz footprint. The incentive auction is reliant on a reverse-auction process that will see television broadcasters turn in spectrum holdings in exchange for cash, though the total amount of spectrum made available for the telecommunications industry won’t be known until the reverse-auction process is complete.
Bored? Why not follow me on Twitter?
89
