AT&T's (NYSE: T) proposed $48.5 billion acquisition of DirecTV (NASDAQ: DTV) is not just about streamlining content costs and creating a platform for delivering video content to multiple screens. According to a top AT&T executive, the deal will also create synergies in advertising, set-top box development, billing and more.
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Speaking at the J.P. Morgan Global Technology, Media and Telecom Conference, AT&T CFO John Stephens said that the DirecTV deal will provide the two companies with the opportunity to deliver a superior video product by giving them the chance to streamline set-top box development and improve the quality of the user interface. Stephens didn't provide specifics about the video product that AT&T is envisioning, but said that the company would try to take the best of AT&T's U-verse product and DirecTV's satellite product and create an offering that makes both products better. "We have the opportunity to leverage the talent of both companies and bring it together," he said.
He also said the deal will provide both companies with more leverage, particularly when it comes to negotiating content deals.
Stephens emphasized that DirecTV's current negotiations with the NFL for its exclusive rights to the NFL Sunday Ticket will be handled by solely by DirecTV because the two companies are still obligated to operate as separate entities until the merger is approved by the FCC and the Department of Justice, which is not likely to happen for at least 12 months. However, he added that he believes the combined company will have tremendous leverage when it comes to future content negotiations as it will be able to provide content owners with the ability to reach 70 million new customers. "We will go to the content guys and the new factor is 60 million or so tablets or smartphone customers and 10 million broadcast customers that don't get subscription video from AT&T," Stephens said. "We are going to give them with the opportunity to reach 70 million new customers."
Interestingly, Stephens said that the reason the company didn't consider acquiring Dish Network (NASDAQ: DISH) was because it believed that Dish would invoke more regulatory scrutiny because of the spectrum that it owns and because it has clearly stated its intentions to be a broadband company. "Dish has spectrum. And that spectrum would raise additional regulatory scrutiny and questions at a time when some FCC spectrum auctions are scheduled," Stephens noted.
Expect AT&T executives to continue to tout the benefits of this proposed acquisition. The deal is undergoing scrutiny from analysts and not all are in favor of the deal. In a research note from Neil Begley, senior vice president of Moody's, he was critical of the deal, noting that AT&T's wireline network and the DirecTV satellite network will not be able to be integrated and AT&T's wireline network will require more fiber optic investment in the last mile to be competitive in the long-term.
In addition, he speculated that DirecTV could lose its exclusive rights to the NFL Sunday Ticket package. He said he didn't think it would lose all rights to the content but could opt to go the non-exclusive route in order to reduce its costs.
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