It might not have seemed obvious, a few years ago, what stance either AT&T or Verizon "should" take towards future video entertainment strategy. Both firms had modest share of the linear video business, even if video was an essential ingredient for the triple play anchor service.
Today, AT&T and Verizon are taking different tacks to video entertainment. AT&T has made a bigger commitment to linear video. Verizon is emphasizing mobile video.
To be sure, there are some commonalities. AT&T believes its ability to bundle video entertainment, on a national basis, will help it sell and retain mobile accounts that also are sold nationwide.
Verizon, on the other hand, had a smaller fixed network footprint to begin with, and concluded for several reasons that the better bet was to "go mobile," since perhaps 85 percent of total Verizon revenue is generated by mobile services.
Aside from other considerations, the DirecTV acquisition was immediatly accretive for AT&T in terms of free cash flow. That is an important consideration for a firm committed to continual dividend payments and dividend increases.
Long term, neither firm believes linear video will continue to be as big a business, or have the profit margins, as at present.
In the near term and medium term, however, linear and other forms of video entertainment often are seen as essential products to support the fixed network business case, which no longer can be supported by voice, Internet access as a stand-alone product, or a dual-play voice-plus-Internet-access approach.
Some have argued AT&T would have been better served had it not acquired DirecTV. The thinking there is that the capital could have been deployed in Internet access facilities. Whatever the merits of those arguments, there would have been no immediate lift in free cash flow or revenue magnitude, had that choice been made.
source: Market Realist
Tuesday, October 27, 2015
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