AT&T on DIRECTV acquisition
John J. Stephens, AT&T’s (T) chief financial officer and executive vice president, participated in the Deutsche Bank Media, Internet, & Telecom Conference on March 9, 2016. During the conference, Stephens highlighted the 2016 goals of the company with respect to DIRECTV (DTV). The telecom player acquired DIRECTV on July 24, 2015. The total transaction value of this acquisition was ~$63 billion.
During the conference, Stephens stated that “we need to focus on getting all that integration work or as much of it, behind us as possible, that not only includes the cost savings activities but the operational, the systems, the processes, the single truck roll, getting the – not only the content pricing right, but the content rights digital, mobile, all of those kinds of activity.” He added, “so we’re really focused on that, our goal for the year is to come out of the year with $1.5 billion of cost run rate savings.”
Cost synergies from the DIRECTV transaction in 2017 and later
As you can see in the above figure, and according to the company, the DIRECTV transaction is expected to help bring down costs associated with operations, general administration, the supply chain, and content acquisition.
The company anticipates cost synergies in the range of $1.5 billion to $2 billion in 2017 and over $2.5 billion in 2018. For diversified exposure to select telecom companies in the United States, you may consider investing in the SPDR S&P 500 ETF (SPY). The ETF held a total of ~2.4% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of December 2015.