AT&T says it is buying DirecTV for $95 per share, or $49 billion, a move that gives the telecommunications company a larger base of video subscribers and increases its ability to compete against Comcast and Time Warner Cable, who merged in February, according to the Associated Press.
The Dallas-based company proposed a combination which could improve its Internet service by pushing its existing U-verse TV subscribers into video over satellite service, and thereby free up bandwidth on its telecommunications network, the AP reported.
AT&T's acquisition would expand its customer base by 20 million for its U-verse fiber product, which provides television and Internet service, according to the AP.
The transaction may also allow current DirecTV customers to get Internet service where AT&T's U-verse is available, the AP reported.
AT&T currently offers a high-speed Internet plan in a bundle with DirecTV television service but the acquisition would help it further reap the benefits of that alliance, according to the AP. DirecTV would continue to be based in El Segundo, California, following the merger.
DirecTV's growth has been hurt because unlike cable companies, it is unable to offer broadband alongside its TV subscriber services, the AP reported. AT&T has about 10.4 million U-verse Internet customers in states such as California and Texas.
The transaction raises questions on what DirecTV's rival No. 2 satellite TV operator Dish Network Corp, controlled by chairman Charlie Ergen, may do now that its larger rival, which has long looked like a possible merger partner, is no longer available, according to the AP.
The companies expect the deal to close within the next 12 months following a government review, the AP reported.
Goldman Sachs Group and Bank of America Merrill Lynch are advising DirecTV, while Lazard Ltd is advising AT&T, the people said.A spokeswoman for AT&T declined to comment, according to the AP. A DirecTV spokesman did not immediately respond to a request for comment.
