AT&T Inc. (T) and DIRECTV (DTV) have taken their ambition of a prospective merger to another level by approaching Congress. Both the companies have reached out to lawmakers trying to persuade them in support of the big transaction by stating the potential synergies arising from the deal, which would benefit not just the two companies but the entire economy as a whole.
Reportedly, both the companies have argued that the deal will be a boon for the market. It will positively impact competition and force other players to reduce prices, ultimately benefiting the end users. Although AT&T and DIRECTV have not confirmed any price reduction in their services upon merger, going by various analyses, there lies the possibility of a downward price revision on cable products like bundled services including video and broadband.
Selling of interest in the Mexican giant America Movil (AMX) may somehow work in favour of AT&T. However, how far Congress can influence Federal Communications Commission’s (FCC) decision to favor the mega merger between AT&T and DIRECTV is something to watch out for.
While there were positive-to-neutral reactions arising in the first of two Capitol Hill hearings held on Tuesday this week, there are still many questions that concern Congress about the impact of the proposed merger on competition in the pay-TV market.
In May, it was reported that AT&T is reportedly gearing up for the buyout of one of the largest U.S. satellite TV operators – DIRECTV. (Read more: AT&T in Talks to Buy DIRECTV)
The transaction is touted to be one of the biggest merger and acquisition deals in the pay-TV industry, which is undergoing significant consolidation. Earlier this year, Comcast struck a deal worth $45 billion to acquire Time Warner Cable Inc. (TWC). It marked the merger of the two largest cable companies in the U.S. With the proposed deal, AT&T would be in a position to tap significant opportunities budding from the ongoing changes in the cable television business.
AT&T currently has a Zacks Rank #3 (Hold).
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