Saturday, May 17, 2014

AT&T Will Announce DirecTV Acquisition May 18, 2014

AT&T will announce its purchase of DirecTV as early as May 18, 2014. The deal, which some believe will cost AT&T about $50 billion, is controversial in some quarters. 

The contrarian view is that the deal exposes AT&T to a greater dividend payment burden, increases debt load and offers rather negligible strategic advantages, as the linear video business is declining or, at best, flat, in terms of revenue. 

The opposing view is that the deal makes AT&T a leading player in linear video entertainment for the first time, vaulting AT&T to about second in terms of overall video market share, providing lots of additional cash flow.

Even if the deal does not directly improve AT&T's ability to upgrade its Internet access speeds, the additional cash will underpin the effort. 

Also, the deal might allow AT&T to free up more bandwidth on its fixed network for Internet access services, at least in region, where AT&T already operates fixed networks. At some incremental level, the deal also gives AT&T enough new heft in contract negotiations with content providers that the cost of acquiring content will drop. 

Also, the same deal should increase AT&T's leverage in negotiating for future rights to streamed versions of linear content. 

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