Merger update: AT&T’s DIRECTV transaction seems on track



DIRECTV transaction

In the last part of this series, we learned about the increasing base of U-verse video subscribers. Now, we’ll look at what’s happening in AT&T’s (T) proposed acquisition of DIRECTV (DTV). DIRECTV is a direct broadcast satellite, or DBS, service. At the end of 3Q14, DIRECTV had a video subscriber base of ~20 million in the US and ~18 million in Latin America. Unlike AT&T, the company doesn’t provide broadband and voice services to customers. In May 2014, both the companies entered a merger agreement. AT&T agreed to acquire DIRECTV for $67 billion.

DIRECTV is the second largest pay-TV provider in the US. The largest US pay-TV provider is Comcast (CMCSA). Its proposed merger with Time Warner Cable (TWC) will make it the biggest US media company.

You can get a diversified investment in these media companies through the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY had ~10.4% of its holdings in these companies on February 11, 2015.

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Current status

According to AT&T’s management, the DIRECTV transaction will be complete by the end of the first half of 2015. The FCC (Federal Communications Commission) is expected to decide on the deal in March 2015. Randall Stephenson—AT&T’s chairman and CEO—spoke about this at the company’s 4Q14 earnings conference on January 27, 2015.

Currently, the transaction is being reviewed by the FCC. The FCC is collecting information from both of the companies to understand how the merger would impact the US media space. The FCC reviews merger and acquisition transactions in the US communication industry to promote competition and protect consumer interest. Please read Investors should be aware of regulations in the telecom industry to learn more.


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