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


Aug. 5 2015, Updated 10:06 a.m. ET

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.”

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.

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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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