In this series, we’ll look at the highlights discussed by AT&T (T) at the recent Jefferies Technology, Media, and Telecom Conference. Beginning in 4Q16, AT&T plans to initiate three services: DIRECTV Now, DIRECTV Mobile, and DIRECTV Preview.
During the Deutsche Bank Media, Internet, & Telecom Conference held on March 9, 2016, John J. Stephens talked about DIRECTV’s Latin American operations.
According to AT&T, the DIRECTV merger is expected to help in bringing down costs associated with operations and general administration, supply chain, and content acquisition.
AT&T and DIRECTV merged on July 24, 2015. At the completion of this transaction, the equity value of DIRECTV was ~$47.1 billion and its net debt was ~$15.9 billion.
During the UBS Global Media and Communications Conference, AT&T’s chief executive officer talked about the cost synergies from the DIRECTV acquisition.
On December 9, Amazon announced that it has started a service for Prime members that includes ordering beer, wine, and spirits for delivery in Manhattan.
The DIRECTV (DTV) transaction brought content cost benefits 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.
In this series, we’ll look at the performance of AT&T’s (T) overall domestic wireless component in 3Q15. Note that AT&T has divided its operations into four new divisions.
The acquisition of Cablevision (CVC) by Altice will create the fourth-largest cable operator in the United States. The US cable industry is already feeling increasing competitive pressure from over-the-top players such as Netflix (NFLX).
By 2018, AT&T expects multiple cost synergies from the DIRECTV merger in its supply chain, operations and general administration, and content acquisition.
AT&T’s 2015 Mexican acquisitions include Nextel and Iusacell. In 2Q15, AT&T’s international segment generated $491 million in revenue, including results from both these entities.
The US over-the-top market includes key players such as Netflix (NFLX), Amazon (AMZN) Instant Prime, and Hulu Plus. The majority of American have used one of these services.
The AT&T–DIRECTV merger agreement was signed in May 2014. At the time, the companies believed the transaction could produce ~$1.6 billion in annual cost synergies.
The AT&T–DIRECTV merger agreement was originally signed in May 2014. AT&T (T) has finally acquired DIRECTV (DTV) for ~$67.1 billion, including net debt.
Comcast has consistently added—net—Internet subscribers. At the same time, since 1Q14, it has either lost video subscribers or only marginally added—net—video customers.
Cable Communications revenue increased by ~6.3% year-over-year to ~$11.4 billion in 1Q15. Revenue from the Business Services subsegment increased by ~21.4% year-over-year to ~$1.1 billion.
The merger is expected to bring typical synergies to the combined entity. But AT&T now expects more benefits from the DIRECTV transaction than it anticipated.
OZ Management initiated a new position in Comcast (CMCSA) in 4Q14 by purchasing 8,063,097 Comcast shares, representing 1.26% of the fund’s 4Q14 portfolio.
In 4Q14, OZ Management initiated new positions in Comcast (CMCSA), Yahoo! (YHOO), Endo International plc (ENDP), DIRECTV (DTV), and CDK Global Inc. (CDK).
A set-top box is a device that converts signals transmitted by IP, cable, satellite, and digital terrestrial (DTT) to the output content that we see on TV.
FCC regulations include the FCC’s oversight of must-carry rules. The FCC also regulates basic service pricing in areas where competition is insufficient.
Media networks face stiff competition for acquisition and distribution of content. Quality and exclusivity add to competition across the media value chain.
AT&T expects that synergies from the DIRECTV merger, as well as its OTT (over-the-top) content offering, will help it in providing video on any device.
DIRECTV is a direct broadcast satellite, or DBS, service. At the end of 3Q14, DIRECTV had a video subscriber base of ~20 million in the US and ~18 million in Latin America.
The Hospira portfolio includes generic acute-care and oncology injectables, biosimilars, and integrated infusion therapy and medication management products.
Farallon Capital Management started a new position in Tim Hortons Inc. (THI) during the third quarter of 2014. The position accounted for 2.62% of the fund’s 3Q14 portfolio.
During the company’s 3Q14 earnings call, management said it wanted to get back to an A- credit rating within four or five years. But that won’t be easy.
In the third quarter, Verizon added 114,000 net FiOS TV subscribers. The service is credited with being more cost-effective and having enhanced features.
AQR Capital sold a position in Tableau Software Inc. in 2Q14. The company accounted for a 0.0346% position in the fund’s first quarter U.S. long portfolio.
Although the pace of growth for Verizon has slowed down a little in the subscription TV market, it still continues to gain subscribers in an otherwise declining pay-TV market.
On February 12, 2014, Time Warner Cable (TWC) and Comcast (CMCSA) agreed to merge. The two companies provide cable TV and broadband access separate geographic areas.
As an investor, you should always do these calculations based on different timing estimates. Time Warner Cable and Comcast are guiding for an end-of-the-year close.
In merger arbitrage, you’ll generally buy the acquired company’s stock and sell short the acquiring company’s stock. So how will this play out when you look at the Integrys-Wisconsin deal?
On June 15, 2014, Medtronic (MDT) and Covidien (COV) reached an agreement to merge via a scheme of arrangement. The two companies more or less offer complementary goods.
The Covidien-Medtronic deal is a scheme of arrangement, which is an English-style merger where a court has to approve the transaction once the votes are in.
To perform merger arbitrage, the investor will generally buy the stock of the company being acquired and sell short the stock of the acquiring company.
Risk arbitrage as a strategy is basically the act of picking up nickels in front of a steamroller. When a deal successfully closes, you get a nickel. When a deal breaks, you lose a buck.
If there’s a vote for the deal, the next step will be the release of the preliminary proxy statement. The proxy statement contains all the data in the merger agreement as well as some other important pieces of data.
Typically, approaches end up with a deal. Why? The target board of directors has a fiduciary duty to shareholders to get the best price for the company.
Not all deals are cash deals, however. Often companies will issue stock in lieu of giving cash for a deal. This adds a layer of complication to the process and also some risk factors we need to consider.
Merger arbitrage, otherwise known as “risk arbitrage,” is an investment strategy that primarily focuses on mergers and capturing the spreads on announced deals.
A few weeks ago, AT&T (T) agreed to buy DirecTV (DTV) for a total valuation of $67 billion. According to the deal, AT&T will pay $95 per share to DirecTV, split between $28.5 in cash and $66.5 in stock.
