AT&T Wants to Buy DirecTV, But Is It a Good Idea?

Source: http://www.flickr.com/photos/mrjkbh/

Apparently all this talk of Comcast wanting to buy Time Warner got the upper brass at AT&T (NYSE:T) thinking about acquisitions of their own. According to The Wall Street Journal, AT&T has approached DirecTV (NASDAQ:DTV) to discuss buying the company. It would be part of a plan for AT&T to greatly expand its TV offerings, and to compete with the potential Comcast-TWC merger. No deal has been signed yet, but the Los Angeles Times says that “exploratory talks” are underway and that “both companies have formed due diligence teams to review a potential sale.”

The deal, according to The Wall Street Journal, could be worth upwards of $40 billion — DirecTV’s current market value. It would add DirecTV’s 20 million subscribers to AT&T’s 6 million U-verse TV subscribers, making the new company the largest pay-TV provider in the country. But if the Comcast-TWC deal also goes through, the resulting company would be even larger, with 30 million subscribers.

As it stands right now, DirecTV is the country’s largest satellite TV provider and the second-largest pay-TV provider overall. Only Comcast has more customers. However, DirecTV doesn’t offer broadband Internet, which the deal with AT&T would provide.

For the deal to go through, federal regulators would have to approve it; they still haven’t approved the Comcast-TWC merger. Before either deal can go through, the U.S. Justice Department would have to approve them from a competition standpoint, and the Federal Communications Commission would then have to make sure the deals advance the public interest.

CNN reports that Randall Stephenson, the CEO of AT&T, looked at the potential Comcast-TWC merger as “a blockbuster deal” and an “industry redefining deal from our standpoint.” He said that the combination “creates an impressive business” and thinks the merger will be approved.

If both deals pass regulators’ muster, we’re going to be looking at some mighty large media companies with an enormous number of subscribers — plus the power that would bring. While that might be a good thing for the companies in question, it’s much less certain that it will benefit consumers.

Why are these media companies suddenly so eager to gobble one another up? The prevailing opinion is that the more customers a media company has, the more of a say it gets in the uncertain future of the media landscape. With companies like Netflix, Amazon, Apple, and Microsoft raking in big media profits, the future of any given media company is uncertain.

Industry analyst Craig Moffett doesn’t think much of the proposed AT&T-DirecTV deal. In an email to CNN, he said: “It feels to me like strategy by process of elimination — first Vodafone, then Dish, now DirecTV — rather than by a disciplined strategy of acquiring the right set of assets to compete. That is usually a terrible way to build a company. It could probably be approved, but if you’re AT&T, be careful what you wish for.”

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