AT&T (NYSE: T) reportedly talked to DirecTV (NASDAQ: DTV) recently about a merger. The potential move, valued at more than $40 billion, was first reported by The Wall Street Journal.
In the wake of Comcast's (NASDAQ: CMCSA) proposed $45.2 billion Time Warner Cable (NYSE: TWC) acquisition, a deal between the nation's largest satellite provider and an up-and-coming pay TV service with an ever-stronger broadband arm would make sense. DirecTV's video-first business is increasingly challenged by broadband-rich wireline providers; AT&T's U-verse TV, meanwhile, can't reach every nook and cranny of its 22-state franchise, even as the carrier pushes forward its multibillion-dollar, fiber-rich Project Velocity IP infrastructure upgrade.
The WSJ reported that DirecTV--which has also been reported in talks with fellow satellite TV service provider Dish Network (NASDAQ: DISH)--was amenable to the merger.
In its most recent earnings call with analysts, DirecTV executives made clear that the company considers broadband an important part of its business mix. One effort to make the company more broadband-enabled uses a wireless play that would seem to fit into AT&T's 4G LTE strengths.
"It's kind of almost a tower-by-tower, neighborhood by neighborhood build," DirecTV Chairman, CEO and President Michael 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."
The plan White discussed is being put into effect for DirecTV customers in South America. It could work equally well in rural areas where AT&T has built out broadband infrastructure via Project VIP but is lacking the wireline infrastructure to deliver U-verse TV over fiber.
AT&T, like Comcast, probably has the resources to pull the deal off.
The carrier's wireless business is flourishing, having added 625,000 postpaid net wireless subscribers in the first quarter. In wireline, AT&T recently announced an aggressive plan to deliver 1 Gbps to as many as 100 qualified municipalities and cities in 21 regional markets across its footprint.
Financially, the company is reportedly worth $185 billion, according to a Time story.
AT&T declined to comment to FierceCable on the report.
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