Consolidation is the name of the game these days in the telecommunications industry. This observation is exemplified by the upcoming purchase of DirecTV for a figure approaching $50 billion by the mother of all telecoms, AT&T. The idea behind the merger is for AT&T to expand its customer base exactly at a moment in history when the industry is facing several complex challenges.
The merger was approved by the boards of both companies on Sunday. In addition to widening the customer base, the companies are looking for ways to also control their content and its delivery. Faced with the threat of new technologies such as streaming and wireless, cable and satellite service providers are struggling to stay competitive by offering a wider range of services and products while simultaneously keeping their shareholders happy by growing revenue.
The deal will see AT&T paying DirecTV shareholders $95 per share. Including DirecTV’s debt that AT&T also agreed to pay, the entire value of the deal is estimated at $67.1 billion.
“Customers will be able to get wireless, voice, data, TV and home security from the same company nationwide,” says Roger Entner, an analyst at Recon Analytics. “It allows (AT&T) to grow the share of consumers’ spending on telecom.”
News of the upcoming deal was first leaked on April 30, and since that date the share price of DirecTV stock soared 12%.
“This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens,” said Randall Stephenson, AT&T’s chairman and CEO.