AT&T Acquires DIRECTV, Changes the US Pay-TV Landscape

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Part 9
AT&T Acquires DIRECTV, Changes the US Pay-TV Landscape PART 9 OF 10

The AT&T–DIRECTV Merger Makes for Solid Bundling Opportunities

Bundles of AT&T–DIRECTV offerings

The AT&T–DIRECTV merger was completed recently, on July 24, 2015. In the previous parts of this series, we learned about some of the benefits that the merger deal brings to both AT&T (T) and DIRECTV (DTV). AT&T gains a massive US pay-TV subscriber base and the opportunity to sell bundled services to more customers.

The AT&amp;T–DIRECTV Merger Makes for Solid Bundling Opportunities

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Like Verizon (VZ), AT&T had a relatively small video subscriber base before the merger. Meanwhile, the telecom company had a significant Internet subscriber base. As we can see in the above chart, AT&T had ~6 million U-verse video connections and ~16 million wireline broadband connections at the end of 2Q15.

Wireline Internet services are more profitable for telecom companies than video services. This is due to the significant content costs we discussed in an earlier part of this series.

DIRECTV’s (DTV) large pay-TV subscriber base should give AT&T significant bundling opportunities.

AT&T–DIRECTV: Combined retail effort

The combined retail presence of AT&T–DIRECTV should also have a positive impact on the growth of bundled services in both wireline and wireless segments. According to AT&T, it had around 2,300 company-owned stores as of May 13, 2015. The firm offered video products in only around 1,300 stores. Distributing DIRECTV offerings in all the AT&T owned-stores should benefit AT&T.

You may consider diversified exposure to AT&T by investing in the iShares Core S&P 500 ETF (IVV). IVV had ~1% exposure to the company as of June 30, 2015. Alternatively, you could get exposure with the iShares Russell 1000 Value ETF (IWD). IWD had ~1.8% exposure to AT&T at the end of June.


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