AT&T’s $49 Billion Acquisition of DirecTV Won’t Hurt Satellite Production

by Bill Ostrove, Space Systems Analyst, Forecast International.

AT&T Inc has completed its $49 billion acquisition of direct-to-home (DTH) satellite television provider DirecTV. DirecTV will be folded into AT&T’s Entertainment & Internet Services division, which also includes AT&T’s terrestrial TV and broadband Internet services.

The combined company will be the largest pay TV provider in the world when measured by subscribers. The company provides services to more than 26 million customers in the U.S. and more than 19 million customers in Latin America. Additionally, AT&T has more than 132 million wireless subscribers and connections in the U.S. and Mexico; offers 4G LTE mobile coverage to nearly 310 million people in the U.S.; covers 57 million U.S. customer locations with high-speed Internet; and has nearly 16 million subscribers to its high-speed Internet service.

In order to get approval for the deal from the U.S. Federal Communications Commission (FCC), AT&T had to agree to some conditions. The company will expand the footprint of its fiber-optic broadband Internet service by about 10 times its current coverage area. The company also agreed to adhere to the FCC’s strict net neutrality rules. That means it won’t show favoritism to any online content, including its own.

The deal will benefit AT&T and DirecTV in a number of ways. The two companies offer complementary services. AT&T will be able to bundle satellite TV with its own broadband Internet, wireless, and fixed-line services. One problem for satellite companies is that they cannot offer broadband Internet to compete with cable companies. This deal will mitigate that problem for DirecTV. Additionally, combining the TV offerings from AT&T and DirecTV will increase the customer base and give the combined company more leverage when negotiating contracts with TV channels.

Satellite deliveries to DirecTV will likely not be impacted by the acquisition. Satellites will continue to play a vital role in the combined company, since satellite services will be offered as part of bundled packages. AT&T will continue to purchase satellites to replace retiring in-orbit birds as well as to expand services, especially in Latin America – an important growth market. The fact that the merger creates a stronger company could also benefit satellite production.

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