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

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Part 2
AT&T Acquires DIRECTV, Changes the US Pay-TV Landscape PART 2 OF 10

AT&T Dominates the US Pay-TV Market with DIRECTV Transaction

US pay-TV market after the DIRECTV transaction

In Part 1 of this series, we learned about the AT&T (T) DIRECTV (DTV) merger completed on July 24, 2015. Now, we’ll look at how the DIRECTV transaction has transformed the pay-TV landscape in the US.

As stated in the carrier’s press release, “The newly combined company – the largest pay TV provider in the United States and the world – will offer millions of people more choices for video entertainment on any screen from almost anywhere, any time.”

AT&amp;T Dominates the US Pay-TV Market with DIRECTV Transaction

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As you can see in the above chart, with the DIRECTV transaction, AT&T is now the biggest US pay-TV provider. AT&T had ~6 million U-verse video subscribers at the end of 1Q15. DIRECTV had ~20.4 million US pay-TV subscribers.

The DIRECTV transaction ends the dominance of Comcast (CMCSA) in the US pay-TV industry. The cable conglomerate had ~22.4 million pay-TV subscribers during the period. Dish Network (DISH) now becomes the third-largest US pay-TV provider. It’s followed by Time Warner Cable (TWC) and Verizon (VZ).

Verizon’s FiOS is similar to AT&T U-verse. Verizon had ~5.7 million FiOS video subscribers at the end of 1Q15.

DIRECTV transaction to help AT&T in a cable-dominated industry

Cable companies dominate the US pay-TV market. According to an NCTA (National Cable & Telecommunications Association) analysis of SNL Kagan data, cable had a ~53% share of the industry’s subscriber base at the end 2014. Satellite had a ~34% share. And telecom companies’ offering—IPTV—had a ~13% share. The telecommunications industry is the youngest player in a cable-dominated space. It lacks the economies of scale to compete effectively in the pay-TV market.

In the next part of this series, we’ll discuss how the DIRECTV transaction offers AT&T a critical benefit.

For diversified exposure to AT&T, you might consider investing in the iShares Russell 3000 ETF (IWV) or the SPDR S&P 500 ETF Trust (SPY). IWV had ~0.8% exposure to the telecom company as of June 30, 2015. And AT&T made up ~1% of SPY’s holdings on the same date.

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