Solid bundling opportunities
In the preceding part of this series, we talked about the cost synergies expected by AT&T (T) and DIRECTV (DTV) from their recent transaction. The merger also brings solid cross-selling opportunities for both AT&T and DIRECTV due to the non-overlapping services offered in each company’s individual coverage. In DIRECTV’s coverage, for example, AT&T can sell wireless services and broadband, while in AT&T’s coverage, DIRECTV can provide video services.
According to AT&T’s recent press release, cross-selling is a “$39 million total household opportunity—with 15 million adding wireless, 21 million adding video, and 3 million adding high-speed Internet.” Now, AT&T also has “the ability to broadly offer TV service to its 57 million broadband customer locations,” whereas previously, the company could only “offer U-verse TV and broadband to only about half of these customer locations.”
Larger retail reach in video
Before the DIRECTV merger, AT&T was not offering video services in a significant proportion of its retail distribution network. John Stephens, AT&T’s CFO, had spoken in May about the video retail locations of the company at the Jefferies 2015 Global Technology, Media & Telecom Conference. According to Stephens, AT&T had ~2,300 company-owned stores and offered video products in only ~1,300 of them.
According to AT&T, the number of retail locations offering video products has increased by ~41% since the DIRECTV merger.
You may consider taking a diversified exposure to AT&T by investing in the iShares Core S&P 500 ETF (IVV). IVV held ~1.1% in AT&T on July 31, 2015. Alternatively, you may consider the iShares Russell 1000 Value ETF (IWD). IWD held ~1.7% in the telecom company at the end of July.
Please note that IVV and IWD also held ~1% and ~0.1%, respectively, in Verizon Communications (VZ) on the same date.