AT&T to Buy DirecTV for $48.5 Billion

http://dealbook.nytimes.com/2014/05/18/att-to-buy-directv-for-48-5-billion/?_php=true&_type=blogs&_r=0

by k-mcgrady • 12 years ago

235 164 12 years ago

dealbook.nytimes.com

k-mcgrady• 12 years ago

There's no way this can pass, especially with the Comcast/Time Warner deal still in process. Maybe this will scare regulators into denying both deals.

spacemanmatt• 12 years ago

Maybe it will scare another 10 or 100k out of a lobbyist.

dublinben3• 12 years ago

Why not? AT&T has a fraction of the video subscribers that DirecTV has. They're not a major player at all.

If you really want to avoid AT&T, then Dish still exists as a robust competitor.

eastdakota2• 12 years ago

Doubt there will be any regulatory grumbling since it actually increases competition in the "triple play" space (Internet+Television+Phone). My hunch is that AT&T waited until they thought the Comcast + Time Warner deal was a virtual certainty before pulling the trigger on this. Who this will put more of a squeeze on is content providers (e.g., Disney/ESPN) as they now have to deal with two juggernauts.

6cxs2hd6• 12 years ago

Call me cynical but I can imagine a golf-course deal where Comcast and AT&T agree to this. Theory being, AT&T+DirecTV will seem like a more-meaningful competitor for Comcast+TimeWarner.

us0r• 12 years ago

Unlikely considering Tom Wheeler was both companies Chief Lobbyist.

shiift• 12 years ago

Next up AT&T + Comcast merger... 'Cause why not?

eastdakota2• 12 years ago

That won't happen. Comcast + Verizon, perhaps.

mwally• 12 years ago

Both industries are doomed. I'll stay tuned to see how this turns out in like 5-10 years from now.

npinguy• 12 years ago

Use this as a perfect example to explain to people why Net Neutrality matters.

"What incentive does AT&T have to bring you good streaming experience for Netflix, Hulu, or heck even Youtube when they'd much much MUCH rather you were buying DirecTV from them?"

rm999• 12 years ago

AT&T - and most major ISPs in the USA - already offer TV service. It's true that these consolidations will only give the big players more power, but the conflict of interest already exists.

aroch• 12 years ago

And ATT already provides horrible internet service and doesn't care!

Defeatism!

jusben13694• 12 years ago

Because I'll switch to Comcast or Verizon if I'm an ATT customer and their internet service is bad?

DerpDerpDerp• 12 years ago

I mean, I don't have an option to switch away from Comcast because their internet service is bad.

That's why they can refuse to upgrade their peering with Netflix in the first place, because they know I'm stuck with them, when I'd dump pretty much any ISP who didn't upgrade their peering with a major website that I visit (in like 3-4 months) if I had the option to.

AnthonyMouse• 12 years ago

Because I'll switch to Comcast or Verizon if I'm an ATT customer and their internet service is bad?

Because Comcast is known for the high quality of their internet service? They all have the same incentive to degrade streaming services that compete with their TV packages. You're assuming that they won't each behave the same way even though doing so is to their collective benefit.

tolmasky• 12 years ago

Even if this nightmare scenario plays out, I would gladly trade 5-10 years of bad service that would have VCs and entrepeuners scrambling to provide people what they actually want, and thus creating real new alternatives, as opposed to the Net Neutrality détente that keeps customers and providers antagonistic towards each other. Because thats really what the current plan is, to force ISPs to continue hating their customers and solely providing them with the current level of mediocre service by legislative force.

zanny• 12 years ago

Comcast, Verizon, AT&T, and Time Warner all serve different cable networks. They rarely overlap, so you don't have that choice 99% of the time.

And it isn't really implicitly evil, because they just own the coax in the area and it obviously is not worth the investment to lay redundant wires.

droopybuns• 12 years ago

This answers your rhetorical question:

http://about.att.com/story/the_chernin_group_and_att_create_...

edoceo• 12 years ago

According to them lack of competition is good for the market. Maybe Zuckerburg can start a bandwidth company and bring another (desperately needed) player to the game.

bdcravens• 12 years ago

How? Wireless?

That'd be at least 3 years away, if he could piggy-back on another network.

According to their Q4 report, AT&T spent about $50B EACH in expenses in 2013 on their wireless and wired operations. Zuck only has $25B (personally). How much of a network could he (or Facebook, after he gets shareholder approval) build? This isn't an app built in PHP or Objective C.

sillysaurus3• 12 years ago

Do many young people watch TV anymore? It seems like netflix + youtube scratches that itch.

alaskamiller• 12 years ago

Yes. Except now the shows are timeshifted and streamed online.

jds375• 12 years ago

I think it's really shifting away from TV. As a college student, my friends and I have been completely satisfied with Netflix and the like. I can confidently say that there is nearly a 0% chance I'll be getting cable/directv/whatever when I can just get Netflix/Hulu/etc instead.

ams6110• 12 years ago

Don't most ISPs make it economically infeasible to get internet services without also getting cable TV? Comcast here bundles servies such that internet only is more expensive than internet + cable.

nickpresta• 12 years ago

Between YouTube, Twitch.TV (and related, like Azubu, Speedruns, etc), Crunchyroll, and occasional piracy (GoT), I never turn on my TV unless it's the Chromecast the aforementioned content.

torbit• 12 years ago

This is why they want a tiered internet. They would make a tier specifically for streaming sites, and a discount if you have cable with them.

sb0572• 12 years ago

Well, your comment quickly became outdated.

chc• 12 years ago

Are you really questioning whether Game of Thrones is popular? Of course people still watch TV. A lot of them just pirate it.

krschultz• 12 years ago

Sports. ESPN + NFL Redzone + TNT + Local channels in HD have no good alternative on the internet. If they did I wouldn't pay for TV.

jusben13694• 12 years ago

Yes! Cable = Sports. If they somehow decouple those two then I'm all Internet.

canvia• 12 years ago

Young people don't care about sports either. eSports like they have on Twitch.tv are more and more popular.

A $35 leaf antenna from amazon gets you all the local HD channels for free.

joe_the_user• 12 years ago

Lol,

I don't "pay for TV", literally don't owe a TV, but surprise, surprise, someone charge me for it.

onedev2• 12 years ago

No. I have not paid for TV since I move out of my parents house 4 years ago. I have 0 plans to purchase TV ever in my life.

Even for sports, there are numerous online streams (though illegal) that I will make use of to keep up with critical games like the NBA playoffs.

Other than that the content on TV is garbage, and all the good content I can pirate easily or watch on Hulu/Netflix.

Cable companies are fucked.

acheron• 12 years ago

I don't know why people pay for food when you can just shoplift it, am I right?

tn132• 12 years ago

I dont watch TV at all. The Set top box is lying around without being switched on for last 1 year.

__david__• 12 years ago

Do you mean live TV, or just having cable at all? I don't think I've watched live TV in 10 years.

I'm looking to cut my cord, but the problem is that nothing legit is as convenient as the cable+DVR setup. With those 2 things I have access to practically every TV show on the air (minus Netflix exclusive stuff).

To have access to that wide of a library without cable I need Netflix, Hulu, Amazon Prime, iTunes (and Pirate Bay for the stuff that's just impossible to get). There is not a single (non-computer) device that can play those all on my TV. So it's a bit of a hassle, screwing around to find what service on what device has what show and then remembering when the new ones come out.

Compare that to the stupid, but venerable, DVR where every show I want from whatever random channel just shows up when it comes out in one clean interface.

I want to kill it so bad but from a UX perspective, it's just so much better.

Really, the only thing that gets close to that experience at all is flexget[1] + a private torrent tracker. How sad is that? It really should be a huge kick in the nuts to all the legit streaming services, but I doubt that they even care... DRM just ruins everything. Sigh.

[1] https://github.com/Flexget/Flexget

netcan• 12 years ago

You mean Netflix + Youtube + (the thing we are not mentioning)

wil421• 12 years ago

You cant get the same content in the same quality from places like Netflix or Youtube.

I like to watch new shows not reruns of shows/movies I have already seen, most of the time I have seen them multiple times. I am looking at you netflix.

icpmacdo• 12 years ago

Is this acquisition from cash that AT&T hand or would they go to a bank and work with them for capital?

cshenoy• 12 years ago

$28.50 of the $95/share is cash while the rest is AT&T stock. From the PR release[0], "AT&T intends to finance the cash portion of the transaction through a combination of cash on hand, sale of non-core assets, committed financing facilities and opportunistic debt market transactions."

[0] http://about.att.com/story/att_to_acquire_directv.html

ILIKEPONIES2• 12 years ago

Is it bad that I read this as 'AT&T to Buy DirecTV for 2.7 WhatsApps?'

quotient• 12 years ago

Yes. This is not only a trivial, inconsequential point to raise, but your arithmetic is also off ($48.5/19 \approx 2.55$).

ILIKEPONIES2• 12 years ago

You sound like a fun person to hang out with.

My arithmetic wasn't off. I misremembered the price by $1b.

suprgeek• 12 years ago

The race is officially on! Can the Telecoms retain their terrible monopolies by becoming streaming providers Faster than the Streaming providers (Netflix, Youtube, Amazon Prime et al) trying to become Content creators?

AT&T is running out of customers to squeeze in the cell phone plans market. This is the next frontier for terrible service, exorbitant prices and regulated monopolies...

georgemcbay• 12 years ago

This race is rigged. Even if the streaming providers win the telecoms will just jack up the prices on their bandwidth when net neutrality is killed completely, which I don't think is an avoidable situation at this point.

periferral• 12 years ago

I disagree. If that happens, a new solution will emerge to replace the telecoms. To name a few, decentralized DNS, open wifi, google fiber etc.

adventured• 12 years ago

They can and will jack up their prices regardless of net neutrality.

qq66• 12 years ago

If net neutrality is gone for good, the telecoms don't even have to bother entering the streaming business. They just have to look at Netflix's profits each year and charge (profits-$1) the next year, letting Netflix stay barely in business and capturing the surplus.

001sky• 12 years ago

https://en.wikipedia.org/wiki/AT&T_Broadband

The cable/telco consolidation 1.0 play.

raarts2• 12 years ago

Think. How would the content providers - any of them, from Disney to Facebook - get their content at the consumer without the data-distributors, from Comcast to AT&T ? The saying is internet kills the middleman, but this is the real middleman that needs to be killed, and just as our roads are free and open to everyone, so should the digital roads be.

sukuriant2• 12 years ago

Roads aren't free, we pay for them in taxes and tolls.

jkelsey2• 12 years ago

When people say "free and open", that's context enough to know that they mean free as in freedom, not as in beer. Please stop using this silly red herring.

raarts2• 12 years ago

OF course they are not really 'free', but does Amazon pay toll to get things delivered to you? Do government bodies who maintain the roads, tax large suppliers to make use of them?

rayiner• 12 years ago

Comcast and AT&T aren't the middle-man. They build a necessary part of the infrastructure necessary to get content to the consumer. They're no more the middle-man than FedEx or UPS. Companies like Netflix, etc, are the middle-men: selling other peoples' content over other peoples' wires.

Vis-a-vis roads: the public pays for the roads, while the cable networks have been almost entirely built with private money. Transportation is also a good example of why you probably don't want publicly-funded telecom networks. Older suburbanites vote, younger people don't. That means we have tons of highways out to the suburbs, and decrepit public transportation.

My parents switched from FIOS back to DISH because they missed their low-res Indian channels. They'll be the people voting to decide how much public money to allocate to broadband. Will you be happy with their decision? Especially now that states and cities are out of money? When push comes to shove and it's shoring-up public pensions versus building broadband, where will the money go?

kmfrk• 12 years ago

Put that WhatsApp acquisition in your pipe and smoke it, Zuckerberg.

mahyarm• 12 years ago

A 30 engineer + 20 support staff company, I still bet they have a higher $/employee ratio.

batuhanicoz• 12 years ago

This acquisition is actually pretty easy to make sense of, unlike WhatsApp acquisition of Facebook. This is a company which made USD 31.7 Billion in revenues last year[0].

[0] http://www.sec.gov/Archives/edgar/data/1465112/0001047469140...

jmccree2• 12 years ago

This is interesting. My building has tv/phone/internet via DirecPath, a fiber based isp now owned by DirecTV. The only alternative is via the local telco, AT&T. Will be interesting to see how this plays out.

marincounty• 12 years ago

If they can compete against the devil--Comcast; I'm all for this merger.

wpietri• 12 years ago

Markets with a small number of large players tend to converge in terms of pricing and strategy, so we may end up with a cozy oligopoly rather than any serious competition.

logicallee2• 12 years ago

wow, I thought you meant "million"? You don't just buy a company for $48.5 billion, and have a tiny matter-of-fact headline like this.

What's the last company that got bought for even $30 billion!

This is a mind-boggling sum of money.

Check out the largest mergers and acquisitions of all time:

http://www.bloomberg.com/visual-data/best-and-worst/largest-...

(Do bear in mind inflation - add 45% since 1998 according to http://www.usinflationcalculator.com/)

This deal must still be way up there. I wonder if someone can find the largest acquisitions of the past 2-3 years.

trsohmers• 12 years ago

There have been a lot more, even recent ones... http://www.businessinsider.com/16-biggest-acquisitions-of-al...

logicallee2• 12 years ago

Thanks.

As you can see #16 as listed is in the ballpark and actually it says in your list's lead paragraph that #16, which is what prompted your list article, was for $45.2 billion. (So, less than this deal.) They get their ultimate figure by adding debt the acquirer takes on (as is typical). Including debt, our article actually says "Including the assumption of DirecTV’s debt, the deal is worth about $67.1 billion" so just a hair shy of #16 on your list if you include the debt.

Either way, this is an absolutely mind-blowing deal in nominal terms. (As are all sixteen on your list.) This is a huge amount of money by any standard on Earth.

blantonl• 12 years ago

You have to wonder how much the NFL Sunday Ticket was worth as part of this transaction.

jonknee• 12 years ago

Not very much considering it's up for renewal at the end of this year. There have been some fun rumors about who is in the bidding, including Google.

http://www.bloomberg.com/news/2013-12-12/directv-said-near-r...

capkutay• 12 years ago

I'm surprised Apple didn't get into this recent movement of communications company acquisitions. For 1/3 of their cash pile, they could have streamlined control of not only the devices (tablets, phones, tv's) and the content market place (itunes), but also the infrastructure to provide media and telecom services through possible acquisitions of time warner, directv, and/or tmobile.

mkal_tsr• 12 years ago

There are rumors of partnership with Comcast (which is looking to merge w/ Time Warner)

Istof• 12 years ago

hopefully this will get blocked

sliverstorm2• 12 years ago

It's almost like the industry wants the government to step in on anti-trust grounds.

Wait a minute...

tn132• 12 years ago

This is getting dangerous. Imagine a world where a public transportation company owns the network of roads too and denies any other transportation company to come up besides their own.

snsr• 12 years ago

Not a perfect analogy, but this may be of interest to you -

http://en.wikipedia.org/wiki/General_Motors_streetcar_conspi...

ulfw• 12 years ago

Ridiculous that these things are allowed in the US. So for all your media needs there'll basically be only two providers some day - at&t or Comcast. Pathetic

josephlord• 12 years ago

The graphs in the article are really good and clear, matched scale across the different graphs, enough years for context. I hadn't realised that US cable really was declining on such a scale rather than cable cutting being something more talked about than really happening.

icantthinkofone2• 12 years ago

Dinosaurs mating.

parasubvert• 12 years ago

Net Neutrality is a ruse: providers "promise" to maintain an SLA against their competitors when they still own the last mile, and the service, and the core network. In practice, SLAs are weak sauce.

The more viable competitive model to me would be to a mandatory Open Access Network.

http://www.opennetworkforum.org/what-is-an-open-network

1. Spinoff of existing Big telcos own the core physical fibre or RF infrastructure

2. Various network providers own and operate active equipment & billing on the network - no one owns the last mile

3. Various service providers provide content & applications on the network.

4. No company performing one role can compete in another role, so as to avoid monopoly

This of course will never happen in the USA because the inmates are running the asylum.

So we'll have to rely on countries like Sweden to prove it out:

https://www.acreo.se/sites/default/files/pub/acreo.se/EXPERT...

seoguru• 12 years ago

S. Derek Turner's take: http://www.savetheinternet.com/blog/2014/05/19/why-the-att-d...

"So for $67 billion, AT&T could pass 71 million new homes with gigabit fiber, and connect 21 million new subscribers (assuming an industry-average 30 percent take-rate)."

AT&T to Buy DirecTV for $48.5 Billion

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