AT&T (NYSE:T) has completed its acquisition of pan-American DTH player DirecTV (NASDAQ:DTV) more than a year after the deal was first announced.
The FCC green-lit the US$48.5bn takeover on 24 July with conditions following an in-depth regulatory…
AT&T (NYSE:T) has completed its acquisition of pan-American DTH player DirecTV (NASDAQ:DTV) more than a year after the deal was first announced.
The FCC green-lit the US$48.5bn takeover on 24 July with conditions following an in-depth regulatory review.
The Department of Justice has also cleared the merger, which forms the largest pay TV provider in the world.
“Combining DirecTV with AT&T is all about giving customers more choices for great video entertainment integrated with mobile and high-speed internet service,” AT&T chairman and CEO Randall Stephenson said.
He added: “This transaction allows us to significantly expand our high-speed internet service to reach millions more households, which is a perfect complement to our coast-to-coast TV and mobile coverage.”
“We’re now a fundamentally different company with a diversified set of capabilities and businesses that set us apart from the competition.”
The merged company will have more than 26 million pay TV customers in the US and more than 19 million customers in Latin America, including Mexico and the Caribbean.
AT&T also claims to have more than 132 million wireless subscribers and connections in the US and Mexico.
The company aims to integrate the two businesses over the coming months.
As part of the plans, John Stankey has been appointed CEO of AT&T Entertainment & Internet Services, responsible for leading the combined DirecTV and AT&T home solutions operations. He will report to Stephenson. DirecTV president, chairman and CEO Mike White will retire.
DirecTV shareholders received 1.892 shares of AT&T common stock, in addition to US$28.50 in cash, per DirecTV share.
Together with AT&T’s acquisition of Iusacell and Nextel Mexico, the Texas-based telco expects to generate most of its revenues by the end of 2015 from its business solutions (both wireless and wireline), entertainment and internet, consumer mobility, and international mobility and video units.
Conditions prove controversial
The FCC’s conditions on the transaction have come under fire from critics, with some arguing that they go too far and others saying they do not do enough.
In the recently released order approving the deal, the regulator said it has determined that the combined company will “be a more effective, multichannel video programming distributor (MVPD) competitor, offering consumers greater choice at lower prices”.
Neither company had previously been able to compete with the dominant video providers, the commission said. DTH player DirecTV has about 20 million video subscribers but lacks broadband capabilities, limiting its ability to provide popular video-on-demand and other interactive viewing experiences, it noted. Meanwhile, AT&T’s video product is hampered by higher programme procurement costs, making it harder to lower prices and expand its broadband footprint.
Conditions include requirements to extend fibre-to-the-premises to 12.5 million customers, offer discount broadband to low-income consumers, report to the commission on interconnection deals, and adhere to net neutrality principles on data caps. The latter condition means AT&T will not be allowed to exclude affiliated services and content from data caps on its fixed broadband connections, ensuring all content providers have fair access.
In the order, the FCC said it found that the combined company would boost competition for video and broadband packages which will, in turn, stimulate lower prices.
“We also expect that this improved business model will spur, in the long term, AT&T’s investment in high-speed broadband networks, driving competition and thus expanding consumer access and choice,” it said.
“This is, in other words, a bet on competition.”
The commission said the conditions attached to the merger together “create the opportunity for more robust broadband and video distribution competition…”
Some, however, have argued that they go too far.
Republican Commissioner Ajit Pai said in his own statement that he supports the decision to approve the deal, but not the 17 pages of attached conditions.
“The transaction’s benefits clearly outweigh any harms,” he said. “As a result, there is no need to impose conditions upon it.”
He argued that the conditions “satisfy a regulatory wish list that has nothing to do with the transaction at hand”.
Some, such as the requirement to offer discounted broadband services, amount to an attempt at policymaking via the merger review process, he contended. He noted that the commission had already determined that the deal would lead to “little change (positive or negative)” in the standalone broadband prices of competitors.
Conversely, commissioners Jessica Rosenworcel and Mignon Clyburn have argued that there should have been an additional condition covering access to programming outlets.
Rosenworcel noted that the issue of independent programming and securing access on traditional video distribution platforms came up repeatedly during the review process, but is not addressed by any of the conditions.
“I think this issue is ripe for examination and hope that the commission can find another forum for discussion of this important topic,” she said.
Clyburn also called upon FCC chairman Tom Wheeler to initiate a review of programme access rules to determine whether there are better ways of ensuring a level playing field so smaller operators can remain competitive.
“Indeed the transaction itself highlights the need for a re-examination of our rules when a provider as large as AT&T merges with DirecTV in part to reduce programming costs,” she said.
