New York — AT&T formally agreed on Sunday to buy DirecTV for about $48.5 billion.
The purchase gives AT&T access to the satellite-TV provider’s 20 million subscribers and Full Conus footprint, which will enable selling TV services along with AT&T’s wireless services in territories beyond its traditional wired markets.
Under the terms of the deal, AT&T will pay about $95 a share in stock and cash.
The merger was approved by both boards Sunday, but will need to clear federal regulatory approvals. The combined companies would create a communications giant about equal in size to the one that will be created if the pending Comcast/Time Warner Cable merger is approved.
AT&T U-verse’s TV service has about 5.7 million customers in 22 states, while DirecTV has 20 million subscribers nationally and 18 million customers in Latin America.
Through the deal, AT&T would be able to sell packages of wireless cellphone and TV services almost anywhere in the country through its network of dealers, and in wired markets customers would have the ability to take packages with a choice of U-verse or DirecTV TV service along with AT&T’s broadband, telephony, mobile services and home security.
AT&T, like Comcast if its deal goes through, would also garner tremendous clout in negotiating TV carriage agreements with content providers.
To be seen is how the deal might impact DirecTV’s ability to maintain its exclusive NFL Sunday Ticket package, which it has used to considerable advantage for enlisting new subscribers over the years.
DirecTV chairman Mike White reportedly told a gathering of the company’s retailers that retaining the exclusive rights to sports package was “a sure thing.”
In a formal statement, White said: “This compelling and complementary combination will bring significant benefits to all consumers, shareholders and DirecTV employees. U.S. consumers will have access to a more competitive bundle; shareholders will benefit from the enhanced value of the combined company; and employees will have the advantage of being part of a stronger, more competitive company, well positioned to meet the evolving video and broadband needs of the 21st century marketplace.”
Randall Stephenson, AT&T’s chairman and CEO, added: “This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens.
If approved, DirecTV will operate as an AT&T subsidiary and continue to be based in its current headquarters in El Segundo, Calif. The deal is expected to be closed in about 12 months.
The impact on dealers still carrying DirecTV service remains to be seen. In recent years the satellite service has come to rely less heavily on retail partners, instead using a direct-sales system and network of trained installers.
Still, DirecTV continues to use the assistance of retailers and agents to promote and pitch its services and equipment, and it has had a long-running national program with Best Buy.
Whether the scope of the partnerships will change to include AT&T services as well is also up in the air.
AT&T, meanwhile, will have the leverage to create varied bundled packages it can pitch through its 2,300 retail stores and thousands of dealer and agents.
Eventually, the company may also introduce Internet packages delivered on its wireless networks.
Users of U-verse triple-play service, which includes landline phone, broadband Internet and cable TV, spend about $170 each month (not including wireless service). DirecTV generated $102.18 per user in 2013, up 5.4 percent from 2012, for satellite TV.
In an effort to assuage regulators, AT&T and DirecTV made several “commitments” it will undertake once the approvals are given.
These include expanding AT&T’s broadband service to 15 million residential and commercial buildings, mostly in underserved rural areas, within four years. This will be carried out by running fiber-optic lines directly to the house or a direct radio link for Internet delivery over the last mile between a home and the local exchange.
The combined company would also guarantee broadband Internet speeds of at least 6Mbps for three years after the deal closing, “where feasible,” to customers who only want an Internet service.
DirecTV service will also continue to be made available on a stand-alone basis at current prices that are the same for all customers for “at least three years” after closing.
The combined company also vowed to abide by net neutrality rules established in 2010.