US pay-TV operator DirecTV has hired Goldman Sachs and other advisers following an approach from AT&T to acquire the DTH provider, people familiar with the matter told Dow Jones.
DirecTV’s share price jumped almost 8% after news of the mandate broke,…
US pay-TV operator DirecTV has hired Goldman Sachs and other advisers following an approach from AT&T to acquire the DTH provider, people familiar with the matter told Dow Jones.
DirecTV’s share price jumped almost 8% after news of the mandate broke, and its stock has risen close to 14% since AT&T’s interest was first reported at the start of the month. It now has a market capitalisation of US$45bn.
Speaking on DirecTV’s Q1 earnings call earlier this week, chairman and CEO Michael White declined to comment on AT&T’s apparent interest.
“These reports are not based on official sources of information,” White said.
“We don’t view it as productive to speculate about alternative business combinations, which may or may not occur.”
A merger between the telco and the satellite giant would create a company with approximately 25 million pay-TV subscribers; a significant step up from AT&T’s current 5 million subscriber base through its U-verse service.
Speculation regarding a deal follows a tie-up between cable giants Comcast and Time Warner Cable (TWC), which is currently being examined by regulators. That would create a company with 30 million pay-TV subscribers, following divestitures, and could open the door for AT&T and DirecTV to merge.
However, Comcast and TWC do not compete as they operate in different regions, whereas DirecTV offers its DTH service nationwide meaning it competes with AT&T in certain areas.
AT&T and DirecTV already have a cross-marketing agreement across 22 states whereby they offer a co-branded version of DirecTV’s television where AT&T offers residential broadband and telephone services.
For AT&T, a move into DTH broadcasting would mark a change in tack given that the operator had been eyeing the European market to capitalise on the growing demand for data services.
However, in March, AT&T’s CEO Randall Stephenson and CFO John Stephens both said that the window to do a wireless deal in Europe may be closing.
Stephenson has also indicated that the Comcast/TWC tie-up had shifted him to focus on the US.
New Street Research analyst Jonathan Chaplin noted that the rumours of an AT&T/DirecTV tie-up appeared to be strengthening, but urged investors not to discount a merger with rival Dish Network.
“We believe that a more likely outcome [than an AT&T deal] is either a Dish/DirecTV deal (due to the greater synergy potential) or a Dish/AT&T deal (due to the spectrum advantage that AT&T can get from DISH but not DirecTV).”
