May 22, 2014
Nothing describes the current technology environment better than the word “transient.”
Today, as carriers improve their LTE networks, the smart device industry grows, and mobile data usage skyrockets – it’s clear that the nature of the industry is to constantly change, and that applies for the companies providing these technologies as well.
Of course, there are always mergers and acquisitions to be found in any industry. The difference, however, is that recent deals in telecom are definitively breaking the mold.
It’s official: Technology innovation has reached a point where a phone company and a satellite TV provider have merged to create a more integrated telecom environment.
Regarding the $67 billion deal between AT&T and DirecTV, experts call this move the “best chance for long-term survival” in an environment where “television and telecommunications are increasingly cross-pollinating into one mutant industry.”*
As part of the merger, DirecTV gains access to AT&T’s 73 million wireless subscribers, while AT&T earns valuable relationships with programmers and content partners.
This agreement also includes exclusive rights to the popular NFL Sunday Ticket package for AT&T, which already has a (small) stake in TV with its U-Verse service. And thanks to the merger, AT&T’s U-Verse went from 6 million subscribers to more than 24 million as soon as the companies merged.
AT&T and DirecTV aren’t the first to act upon the potentially lucrative connection between subscription TV and mobile devices.
Last year, Dish Network attempted to acquire Sprint, but the bid was unsuccessful due to Dish lacking the wireless data network it needs* (in the end, SoftBank purchased 78 percent of Sprint shares, Sprint purchased Clearwire, and Dish lost on both fronts).
Now this merger will cover just about everything, minus broadband capabilities. To be fair, the combination of AT&T and DirecTV will accelerate progress for AT&T’s high-speed broadband to 15 million new areas with low penetration*, leaving AT&T bigger and better-equipped to deal with the next massive deal.
Despite AT&T’s anticipated growth as a result of its DirecTV merger, the main providers of broadband will be Comcast and Time Warner Cable.
In early 2014, these two biggest cable companies in the U.S. agreed upon a $45 billion deal in which Comcast will buy Time Warner Cable. It’s the result of months spent fighting for Time Warner Cable, the second biggest U.S. supplier of cable television, as well as its 11 million subscribers.
Experts say that the merger will help Comcast compete with satellite providers like DirecTV, wireless phone companies like AT&T, and streaming services like Netflix.
The merger will offer Time Warner Cable owners roughly 2.8 Comcast shares for each share they own, with Time Warner Cable valued at about $158.82 per share.†
Currently, the two companies hope the deal will be finalized by the end of 2014, but many hurdles stand in its way – like the fact that regulators must investigate the deal’s potential impact upon consumers.
With about 23 million television subscribers alone, Comcast will gain even more leverage over the country’s marketplace for television, broadband Internet and phone services by acquiring Time Warner Cable. Approving this deal would make these combined carriers the country’s dominant provider of television channels and Internet connections, reaching roughly one in three American homes.†
Thus the deal has been causing a commotion, raising concerns about controlling too much of the market.
Going forward, the deal will most certainly come under scrutiny from federal regulators and market experts. In the meantime, we are waiting to observe what will happen from here.
* Bercovici, Jeff. AT&T-DirecTV Merger Shows Telecom And Television Are Now The Same Business, Forbes. Forbes.com LLC.
† Stelter, Brian. Comcast buys Time Warner Cable for $45 billion, CNN Money. Cable News Network, Time Warner (NOT affiliated with Time Warner Cable).