Initial focus on video for smartphones and tablets
In the last part of the series, we learned about AT&T’s (T) proposed acquisition of DIRECTV (DTV). We also learned about possible lower content costs for AT&T after gaining the large subscriber base of DIRECTV. Now we’ll look at the management’s plans for overall video services.
AT&T plans to provide video on multiple devices. However, the company will initially focus on providing video on smartphones and tablets. Randall Stephenson, AT&T’s CEO and president, mentioned this in the company’s 4Q14 earnings conference. The company expects that synergies from the DIRECTV merger, as well as its OTT (over-the-top) content offering, will help it in providing video on any device.
U-verse video to benefit from reduced costs
AT&T offers video services through U-verse video. U-verse is an IPTV (Internet protocol television). It is similar to Verizon’s (VZ) FiOS. As you can see in the above chart, AT&T has a large ~5.9 million subscriber base in this segment. The figure is adjusted for the sale of Connecticut operations to Frontier Communications (FTR).
In its 4Q14 earnings conference, the company mentioned that rising content costs for U-verse are affecting its margins. AT&T expects lower content costs after the DIRECTV merger to positively impact this growing segment.
If you want exposure to Verizon and AT&T, you can invest in the Technology Select Sector SPDR ETF (XLK). The ETF held ~9.4% in these telecoms at the end of January 2015.
OTT content from Otter Media
Otter media is AT&T’s OTT video content investment with The Chernin Group. AT&T expects Otter Media to help it in providing video on multiple devices. Otter Media recently announced that it will take a controlling stake in the online media company Fullscreen, which produces video for YouTube. According to AT&T’s press release in September 2014, Fullscreen had 450 million subscribers and 4 billion monthly page views.