After the recent acquisition of DIRECTV, U.S. telecom behemoth AT&T, Inc. T has come up with a new TV and wireless bundled service plan. Under the latest scheme, customers will be able to avail both the services from a single provider under one bill, at special discounts. Notably, the service will be available starting Aug 10.
AT&T will provide high-definition video service along with digital video recording facilities for four TV sets in a household. The company will also offer 10 gigabytes of shared data along with unlimited talk and text facilities for up to four wireless lines. All these will cost $200 a month in the first year.
Also, customers opting for both wireless and TV services will be given a $10 discount. Availing this, customers will be able to make annual savings of $600 and above in the first year. After a year, the plan price will increase to $235 a month, which will however include a $10 discount on the combined bill. In order to attract rival customers, the company is also offering a $300 bill credit to eligible DIRECTV and U-Verse TV customers who switch to AT&T.
We believe that this new plan will help the company gain more customers as it offers both TV and wireless phone services from a single provider along with attractive discounts.
Notably, DIRECTV enjoys strong presence in both the U.S. and Latin America which will not only help the company attract customers but will also drive its revenues higher in the coming quarters.
Also, the DIRECTV takeover will boost AT&T’s video customer base by an estimated 20.3 million from the current 5.7 million. It will also take AT&T’s pay-TV customer count to 26 million. AT&T presently has over 26 million customers in the U.S. and in an excess of 19 million customers in Latin America, which includes Mexico and Caribbean.
AT&T expects to derive a massive $2.5 billion worth of cost synergies on an annualized basis from the third year. At the time of the announcement of the deal, AT&T had estimated that its annualized cost synergies will be around $1.6 billion. Most of these synergies will result from a significant reduction in content costs, which as a percentage of video revenues is currently higher for AT&T than for DIRECTV. Moreover, a large customer base of the merged entity will lend AT&T a better position to bargain with media companies (content developers).
AT&T currently has a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other favorably-ranked stocks in this sector include T-Mobile US, Inc. TMUS, Inteliquent, Inc. IQNT and Ruckus Wireless, Inc. RKUS. All these stocks hold a Zacks Rank #2.
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