WASHINGTON, July 25, 2015 – Late this week, the rumored merger between communications giants AT&T and DirecTV became reality. AT&T announced Friday that the proposed $49 billion deal between the number two U.S. telecommunications firm and the somewhat less successful satellite TV provider—the country’s largest—has been approved by the Federal Communications Commission (FCC). With conditions, of course.
Over the four years following completion of the deal, the FCC is requiring the new AT&T to grow its high-speed fiber network considerably, building it out to incorporate FCC’s “Open Internet Order.” That means that for a four-year period, AT&T must provide for wider access for public libraries and schools along its networks as well as discounted (i.e., consumer-subsidized) pricing for millions of low-income households in the company’s service areas, with the aim of getting more people online with faster bandwidth.
The FCC also promises to keep an eye on the combined company to make sure it doesn’t attempt to impose data caps on its broadband services or use its size and influence to attack competing video services, a tall order but doable.
The Department of Justice (DOJ), another potential government roadblock to the deal’s approval, has already given the merger its OK as well, promising “not to contest it.” That effectively makes the transaction a done deal as soon as both companies merge payrolls and systems and get it done.
The value of the AT&T/DirecTV deal is an estimated $49 billion and gets AT&T back on a growth path after the government scuttled its earlier proposed acquisition of smaller wireless provider T-Mobile.
Some are already criticizing AT&T for the acquisition. But the company expects DirectTV to quickly become accretive to earnings, even though the cable TV and satellite industries seem to be entering a period of decline due to the gradual “unbundling” of TV and digital entertainment services.
For its part, AT&T defends the transaction, believing that its acquisition of a substantial number of new DirectTV customers in and of itself will enable the former Baby Bell to sell more of its services, including wireless, thus increasing its customer base substantially.