As per a recent Reuters report, U.S. telecom behemoth AT&T Inc. T may get the much anticipated Federal Communications Commission’s (FCC) nod to close its planned purchase of DIRECTV DTV, by next week.
As per unidentified sources, the Department of Justice (DOJ) has finished its review of the merger and is now waiting for FCC’s decision on the same. AT&T has been negotiating with the FCC regarding the terms and conditions of the deal for several weeks now.
Notably, in May 2014, AT&T had inked a definitive agreement to buy DIRECTV for $48.5 billion in a cash and stock deal. DIRECTV is the largest satellite TV operator in the U.S. while AT&T has a strong fiber-based video network. The deal is expected to boost AT&T’s earnings through enhanced video offerings and reduced programming costs.
The DIRECTV takeover will increase AT&T’s video customer base by an estimated 20.3 million from its current 5.7 million. It will also take AT&T’s pay-TV customer count to 26 million. Further, the deal will enable AT&T to provide bundled services inclusive of video, mobile and broadband offerings.
Earlier, The Washington Post had reported that AT&T is even ready to accept majority of the new net neutrality rules adopted by the FCC, provided its buyout of DIRECTV is approved. The FCC, on its part, has been evaluating ways to make sure that the merged entities follow the new rules.
In Feb 2015, the FCC had endorsed net neutrality laws that will classify high-speed broadband (Internet) as a public utility under Title II of the 1934 Communications Act instead of section 706 of the 1996 Telecom Act.
Meanwhile, last month, Comcast Corp. CMCSA terminated its 14-month old $45.2 billion merger plan with Time Warner Cable TWC in the wake of strong reservations expressed by the FCC and the Department of Justice against the transaction. Whether the AT&T-DIRECTV merger crosses this final hurdle successfully, should soon be evident within a few days.
We note that, in the event of the FCC finally approving AT&T’s proposed acquisition of DIRECTV, AT&T will be duly elevated to the second leading position in the U.S. pay-TV market.
AT&T currently carries a Zacks Rank #3 (Hold).
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