LOS ANGELES (AP) — AT&T says it views its planned $48.5 billion purchase of DirecTV as a way to help redefine the video entertainment industry, giving it opportunities to bundle services and tap into growing Latin American markets.
AT&T Inc.'s proposed transaction primes it for the age of Internet-delivered video.
AT&T and DirecTV promised consumer benefits like more economical bundles that tie mobile phone, pay TV and Internet service together on a single bill. AT&T said that it'll probably be 12 to 18 months for robust streaming video offerings to be available, but that bundled offerings should be available soon after the deal closes, which the companies expect to occur within 12 months.
AT&T is currently the second-largest wireless provider with 116 million customers.
The company will gain access to DirecTV's 20.3 million U.S. customers and its 18.1 million Latin American customers. DirecTV's U.S. customers, coupled with 5.7 million U-verse TV customers, will give the combined AT&T-DirecTV 26 million U.S. users for video. That would make it the second-largest pay TV operator behind a combined Comcast-Time Warner Cable, which would serve 30 million under a $45 billion merger proposed in February.
"What it does is it gives us the pieces to fulfill a vision we've had for a couple of years — the ability to take premium content and deliver it across multiple points: your smartphone, tablet, television or laptop," AT&T Chairman and CEO Randall Stephenson said during a conference call Sunday.
Michael White, chairman and CEO of DirecTV Inc., said Monday that his company has been talking off and on with AT&T about a potential transaction for years, but that recent trends in the industry helped make the deal happen now.
The companies are aiming to eke out $1.6 billion in annual cost savings in an increasingly expensive and maturing pay TV business. Using DirecTV's cash flow, AT&T has greater ability to invest in its landline and mobile networks for broader reach and faster speeds in an Internet service market where it risks falling behind a bulked up Comcast-Time Warner Cable.
But the deal could face regulatory scrutiny from the Federal Communications Commission and Department of Justice. Unlike the cable company tie-up, the AT&T-DirecTV merger would effectively cut the number of video providers from four to three for about 25 percent of U.S. households.
Cable companies operate in regions that don't overlap. By comparison, AT&T provides TV service to 22 states, where it is a direct competitor to DirecTV, which operates nationwide. Reducing choice in those markets could result in higher prices for consumers, and that usually gives regulators cause for concern.
White said Monday that customers will see more competitive pricing from the combination with AT&T.
Stephenson said regulatory concerns would be addressed with a number of what he called "unprecedented" commitments. Among them:
— DirecTV would continue to be offered as a stand-alone service for three years after the deal's closing.
— AT&T would offer stand-alone broadband service for at least three years after closing, so consumers could consume video from Netflix and other online services, with download speeds of at least 6 megabits per second where feasible.
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