AT&T's pursuit of DirecTV thrills no one
AT&T is on the verge of buying DirecTV, according to reports. The deal could be worth $50 billion.
In general, the deal seems to be interesting only because it will make the value of a variety of stocks go up or down, though some in the cable industry think that an attempt by AT&T to buy DirecTV would make Comcast’s proposed acquisition of Time Warner Cable look more palatable to regulators.
On the other hand, some people think it will complicate Comcast’s chances to buy TWC.
Flip a coin.
DirecTV has 20.3 million TV subscribers. AT&T has 5.6 million.
The deal would automatically give AT&T a national TV footprint. While there might be some potential for the combined entity to achieve some subscriber growth, that potential is modest at best. Both have pretty much hit a wall on subscriber growth – almost everyone in the TV industry has.
On the broadband side, there might be a little more growth potential than on the TV side. It’s not as if DirecTV subscribers don’t have broadband, it’s just that if they’re outside AT&T’s physical footprint they’re not getting it from AT&T (even inside AT&T’s footprint, there are plenty of DirecTV subs not getting their broadband from AT&T). There is a pool of potential customers to whom a combined AT&T/DirecTV could make bundling offers, but it’s not very big.
Not bad, but if there’s anything in the merger, it’s the combined numbers of subscribers – TV, broadband, and wireless – that advertisers could possibly reach through a single company. The combined company might be able to turn that into a reasonable advantage. And that’s speculative.
Some are even less sanguine about the prospects of these two together. Moffett Nathanson is entertainingly snide about the deal, as they try to figure out how two sinking companies are supposed to rescue each other.
As M/N sees it, DirecTV hit a wall and has no options, and AT&T needs cash flow to pay its dividend. If the profusion of charts showing there’s little point for this deal is too subtle, M/N’s report is studded with images of the Titanic and other disasters to punch home the point.
RBC Capital also thinks this is about AT&T’s dividend.
Whoo. Hoo. AT&T can buy DirecTV, but it won’t be able to buy an exclamation point.
The saddest part of the deal is that it deprives the world of the ability to speculate about other deals: DirecTV and Dish, AT&T and Vodaphone.
What about Dish, which is in pretty much the same situation DirecTV is in? Who could buy it? Who would, now? Verizon? Why? Maybe to gain Dish’s wireless spectrum holdings (Dish has few if any spectrum holdings). But then again, maybe Verizon could just buy Dish’s spectrum holdings.
Maybe some satellite operator from outside the U.S. might buy Dish?
At least we still have T-Mobile and Sprint…