AT&T is reportedly in talks with DirecTV for a possible buyout worth $40 billion to strengthen its broadband position in the market and gain an additional 20 million subscribers.
According to the Wall Street Journal, the discussion between the two companies intensified after Comcast announced its plan to buy Time Warner Cable for $45 billion - a deal that's currently being probed by the U.S Justice Department due to competition issues. It is very likely that the AT&T-DirecTV merger will go through the same process, but said negotiations are still in the preliminary stages.
Both companies will benefit from additional subscribers; AT&T's pay-TV service currently has 6 million users, while DirecTV has a solid 20 million subscribers, plus an added 17 million in Latin America.
AT&T is not the only business interested on acquiring DirecTV. The WSJ also mentioned that Dish Network Corp. chairman Charlie Ergen called DirecTV Chief Executive Officer Mike White in March and offered a partnership. AT&T has also attempted to buy Dish in the past.
The AT&T-DirecTV merger appears to be a win for both companies - DirecTV has been planning an expansion in South America, and AT&T is known for its established broadband infrastructure.
"It's kind of almost a tower-by-tower, neighborhood by neighborhood build," White explained at the company's Investor Day Conference late in 2013. "You get your tower and then you've got to go sell 70 homes in the neighborhood."
A spokesperson for DirecTV refused to comment on the report. AT&T was also not available for comment.
Meanwhile, Businessweek reported that DirecTV shares rose all-time high after the alleged negotiation. Its shares value went up by 5.7 percent, giving it $41.5 billion market valuation. AT&T shares' value also increased by 0.4 percent with a $186 billion valuation.
