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AT&T Has Taken a Different Approach to Diversify Wireless Business

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Sep. 29 2016, Updated 8:17 a.m. ET

AT&T acquired DIRECTV to penetrate the Latin America market

In the previous part of the series, we discussed how Verizon (VZ) has been trying to diversify its wireless business, mainly due to the low-cost strategies Sprint (S) and T-Mobile (TMUS) are pursuing. We discussed how Verizon acquired AOL and Yahoo in order to be a significant player in the online advertising space.

Like Verizon, AT&T (T) also saw a revenue decline in its US wireless business in the last quarter on a year-over-year basis. However, AT&T has taken a different approach to diversifying its US wireless business. It acquired DIRECTV to penetrate Latin America markets, and it acquired Iusacell and Nextel Mexico to penetrate the Mexico market. In the last quarter, AT&T added 742,000 wireless subscribers in Mexico to reach the 10 million subscriber mark in the country. In Latin America, DIRECTV added 87,000 video subscribers in the last quarter.

Pay TV market

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AT&T will further diversify its US wireless business through video streaming service

Through the DIRECTV acquisition, AT&T has become the leading pay-TV player in the US, as the chart above shows. AT&T now has 25.3 million pay-TV subscribers in the US, with Comcast (CMCSA) coming second at 22.4 million such subscribers. Charter (CHTR) is third with 16.9 million pay-TV subscribers. AT&T gained 342,000 satellite video subscribers but lost 391,000 U-Verse video subscribers in the last quarter, which highlights the structural decline that the pay-TV market is going through.

AT&T also has plans to launch DIRECTV video streaming services later this year, which means the company, along with Verizon, wants to penetrate this market. This move could help AT&T further diversify from its US wireless business, as video streaming is another fast-growing space. It will also help AT&T offset the subscriber losses that it’s experiencing in the pay-TV market.

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