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How AT&T’s DIRECTV Transaction Will Benefit U-verse


Nov. 27 2015, Published 3:05 p.m. ET

DIRECTV transaction benefits U-verse

In the last part of the series, we learned about the content cost benefits that the DIRECTV (DTV) transaction brought for AT&T (T). This was due in large part to the size of the pay-TV subscriber base that AT&T now has after the acquisition. During the Morgan Stanley European TMT Conference held on November 12, 2015, John Stephens, the telecom company’s chief financial officer, also talked about content cost benefits for AT&T’s U-verse from the transaction.

Stephens said, “And on a monthly basis, the differential is about $17 a month and the content cost that the U-verse customer pays versus the DIRECTV customer.” Note that AT&T expects content costs for U-verse to be similar to DIRECTV’s in the future.

This is significant considering the size of the base of U-verse video subscribers. At the end of 3Q15, AT&T had ~25.4 million video subscribers in its domestic operations. This base comprised ~5.9 million U-verse video subscribers.

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During the conference, Stephens also highlighted AT&T’s focus on DIRECTV compared to U-verse video, which, as we mentioned earlier, has relatively higher content costs. In 3Q15, AT&T’s U-verse had net losses of ~92,000 video subscribers. Meanwhile, the company added ~26,000 DIRECTV video subscribers in its domestic segment.

About AT&T U-verse

AT&T U-Verse is a fiber-based service for voice, Internet, and video. It is similar to Verizon’s (VZ) FiOS. Both FiOS and AT&T U-Verse may be compared to offerings of cable players such as Time Warner Cable (TWC) and Comcast (CMCSA).

Instead of taking direct exposure to AT&T’s stock, you can consider taking diversified exposure to the company by investing in the SPDR S&P 500 ETF (SPY).

The ETF had ~1.2% of its holdings in the telecom company at the end of September 2015.


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