It’s official. After much speculation, on Sunday AT&T announced it had agreed to buy DirecTV for around $49 billion, immediately turning the telecommunications giant into a major player in pay television that will rival cable companies, reports the Wall Street Journal. Coming mere months after Comcast agreed to pay $45.2 billion to buy Time Warner Cable, the deal also raises “fresh concerns over competition and options for consumers,” notes the Washington Post.
The huge merger marks the latest example of how companies are seeking growth as a strategy to deal with a changing media landscape at a time when people are increasingly watching videos online. When the deal is finalized, which is expected to happen within 12 months, AT&T will gain DirecTV’s 20 million subscribers. And it will be able to offer customers packages that include phone, high-speed Internet and paid television subscriptions. Although AT&T already offered paid-television services, it had a limited reach. "This deal is about getting more money from the same customers," Roger Entner, an analyst at Recon Analytics, tells USA Today. "We are running out of people who want to buy wireless service." Federal regulators are likely to scrutinize the deal closely, in part because it removes a competitor from the Internet market, which means those who are concerned about the increasing power of Internet service providers are likely to protest.
AT&T agreed to pay $95 a share for DirecTV, with $28.50 in cash and $66.50 in stock, according to Bloomberg, which notes that it marks a 10 percent premium over DirecTV’s Friday closing price. “DirecTV is a great fit with AT&T and together we’ll be able to enhance innovation and provide customers new competitive choices for what they want in mobile, video and broadband services,” AT&T’s chairman and chief executive, Randall Stephenson, said in a statement. “We look forward to welcoming DirecTV’s talented people to the AT&T family.”