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AT&T, DirecTV announce $48 billion merger
By Cecilia Kang, Sunday, May 18, 5:16 PM E-mail the writer
AT&T and DirecTV on Sunday announced an approximately $48 billion merger that would create a new telecom and television behemoth to rival cable firms — while raising fresh concerns over competition and options for consumers.
AT&T would gain DirecTV’s 20 million U.S. subscribers, a company with strong cash flows and an ability to fatten its bundle of offerings. The combined firm would be able to offer phone, high-speed Internet and paid television subscriptions to more customers — packages only cable firms such as Comcast have been able to sell.
It is the latest mega-merger to be announced this year in a dramatically shifting telecommunications industry. The titans of the industry have recently rushed to bulk up — in overall size and in diversity of service offerings — as their legacy phone and television businesses fray and consumers turn to the Internet for communications and entertainment.
The deals, which must be approved by federal regulators, have prompted new concern that consumers could be left with fewer options and even higher prices after years of creeping increases in monthly bills. Last year, U.S. cable television prices increased 5.1 percent to an average $64, triple the rate of inflation, according to a government report.
“The industry needs more competition, not more mergers,” said John Bergmayer, a senior staff attorney at Public Knowledge, a nonprofit consumer advocacy group. “We’ll have to analyze this one carefully for potential harms both to the video programming and the wireless markets.”
After a failed attempt three years ago at buying wireless provider T-Mobile, AT&T had been searching for alternative acquisitions. But its choices were limited, with regulators expressing great concern that the wireless and high-speed-Internet markets were not competitive enough.
The Dallas-based company said it would gain broad strategic benefits from buying the nation’s second-largest paid-television provider. The phone giant would have greater power with television programmers to bring down licensing costs. And as the nation’s second-largest wireless carrier, it could use its new prominence in the television industry to bring videos to its mobile customers. El Segundo, Calif.-based DirecTV has an exclusive contracts with programmers, including NFL Sunday Ticket, which allows football fans to watch their favorite teams even if they live outside the local television markets serving the teams.
Originally Posted by RunKC:
They don’t create hardly any good new content. Netflix and Disney are way ahead because of that very reason.
If they are going to compete in this business they need to innovate with quality content that draws people in.
Yep.
That's a big reason why Verizon is selling off a big stake in their media business. The ad revenue they got from Yahoo paid for a lot of their acquisitions, so they didn't lose money but at the same time, without a full blown production studio, they really didn't have a way forward that would drive actual growth. [Reply]
Originally Posted by htismaqe:
It happens all the time, in lots of industries.
Verizon spent the last 4 years buying media companies like Yahoo and is now selling all but a minority stake. They didn't have layoffs to finance the purchase and they didn't take a huge loss like AT&T but business priorities change quickly, especially in tech.
The biggest problem with AT&T is that everybody knew satellite was dying when they bought DTV. They got into the business when it was already too late and paid peak price for it as well.
I’m not 100% sure why they bought DirectTV.
But I remember before that they were having problems building out fiber to the homes and Uverse. [Reply]
Originally Posted by Deberg_1990:
I’m not 100% sure why they bought DirectTV.
But I remember before that they were having problems building out fiber to the homes and Uverse.
That was a big part of it. They were trying to get another access technology. They just acquired one that was already somewhat antiquated.
T-Mobile and Verizon are rolling out 5G now at a brisk pace and it is outperforming a lot of wireline technologies at extremely low latencies, something satellite simply can't do due to physics. [Reply]
AT&T's former CEO was an idiot that didn't give a rat's ass about retaining competent employees and the service went downhill quickly. U-verse was a poor patch until they could get fiber to the home. By fooling around with both U-verse and Direct they got beat by Google and other carriers. [Reply]
Originally Posted by oldman:
AT&T's former CEO was an idiot that didn't give a rat's ass about retaining competent employees and the service went downhill quickly. U-verse was a poor patch until they could get fiber to the home. By fooling around with both U-verse and Direct they got beat by Google and other carriers.
Retaining competent employees is a problem across the tech industry.
A big part of navigating these massive tech companies is institutional knowledge and a large part of competence comes from having that experience.
Unfortunately, that means older employees with tenure and the resulting pay scale.
Most tech companies are constantly looking to jettison experience and bring in fresh faces. Younger is cheaper. [Reply]
Last I heard they scaled back their rollouts because they were having last mile issues. They were testing some sort of wireless last mile technology. But that was 2-3 years ago. [Reply]
Originally Posted by Deberg_1990:
Btw, what’s the latest with Google fiber?
Last I heard they scaled back their rollouts because they were having last mile issues. They were testing some sort of wireless last mile technology. But that was 2-3 years ago.
Originally Posted by BryanBusby:
Younger is not always cheaper.
It depends on the expertise and education required for the job.
It's not always cheaper but by and large, it holds true across the tech industry. I've hired a lot of people and when you consider 3-4% over 15 years vs. a college grad, it's a huge difference. Plus, I only have to pay them for 2 weeks of vacation while a 15-year vet has 5-6 weeks they can accrue. [Reply]
Originally Posted by Deberg_1990:
Btw, what’s the latest with Google fiber?
Last I heard they scaled back their rollouts because they were having last mile issues. They were testing some sort of wireless last mile technology. But that was 2-3 years ago.
Fiber by itself is pretty cheap. The real cost is in the electronics and right of way issues. With 5G, you're going to see a lot of wireless last mile stuff. I live in the country with only satellite and dial-up internet available. We couldn't even get reliable cell service until about 3 months ago when they placed a new tower about a mile from our house. Now I'm getting mailers and email from wireless ISPs. [Reply]
Originally Posted by oldman:
Fiber by itself is pretty cheap. The real cost is in the electronics and right of way issues. With 5G, you're going to see a lot of wireless last mile stuff. I live in the country with only satellite and dial-up internet available. We couldn't even get reliable cell service until about 3 months ago when they placed a new tower about a mile from our house. Now I'm getting mailers and email from wireless ISPs.
Right of way is the single biggest barrier. Fiber is cheap but finding a place to put it and then actually deploying it is mega-expensive. Especially in places without a robust underground infrastructure. [Reply]
That's a big reason why Verizon is selling off a big stake in their media business. The ad revenue they got from Yahoo paid for a lot of their acquisitions, so they didn't lose money but at the same time, without a full blown production studio, they really didn't have a way forward that would drive actual growth.
It really didn’t help matters that they already had Uverse and were in the process of building their fiber to the house network in the 21 states where they operate locally when they decided to acquire Directv. But then they acquired Warner, immediately stopped the existing build of the fiber to the curb which wasn’t even halfway done. On top of that, they started another streaming service (HBO Max) to go along with all of their other TV services (Directv, Directv streaming, Uverse and ATT TV now) which has to be really confusing to the customers. [Reply]