AT&T Obtains Extension from Mexico to Seal DIRECTV Deal - Analyst Blog
U.S. telecom behemoth AT&T Inc. T recently received a six-month extension from Mexican regulator Federal Telecommunications Institute (IFT) to close its planned purchase of DIRECTV DTV.
In May 2014, AT&T had inked a definitive agreement to buy DIRECTV for $48.5 billion in a cash and stock deal. DIRECTV is the largest satellite TV operator in the U.S. while AT&T has a strong fiber-based video network. The planned acquisition of DIRECTV will promote AT&T in the domestic pay-TV business to the second-largest position.
The DIRECTV takeover will increase AT&T’s video customer base by 20.3 million from its current 5.7 million. It will also take AT&T’s pay-TV customer count to 26 million. Moreover, the deal will boost AT&T’s earnings through enhanced video offerings and reduced programming costs.
Notably, in Nov 2014, IFT had given the green signal to the AT&T–DIRECTV merger. However, AT&T had asked for an extension from the Mexican government as the Federal Communications Commission (FCC) approval to the takeover is still impending.
Last month, AT&T announced plans to increase its investments in Mexico over the next three years for enhanced market traction. To this end, the company has already acquired Iusacell, the third largest wireless service provider in Mexico for $2.5 billion.
In Apr 2015, the company also acquired the Mexican operations (popularly known as Nextel de Mexico) of the currently bankrupt wireless operator NII Holdings Inc. for $1.88 billion. DIRECTV too boasts a strong presence in several Latin American countries, including Mexico.
Meanwhile, as per the latest report in The Washington Post, AT&T is ready to accept the majority of the new net neutrality rules adopted by the FCC, provided its acquisition of DIRECTV is approved. In Feb 2015, the FCC endorsed net neutrality laws after a favorable voting margin of 3-2. The new laws will classify high-speed broadband (Internet) as a public utility under Title II of the 1934 Communications Act instead of section 706 of the 1996 Telecom Act.
All Internet service providers (ISPs), along with several cable and telecommunications industry bodies, had vehemently opposed to net neutrality. Moreover, AT&T and other trade groups had filed a lawsuit against the FCC.
Interestingly, last month, Comcast Corp. CMCSA terminated its 14-month old $45.2 billion merger with Time Warner Cable TWC in the wake of strong reservations expressed by the FCC and the Department of Justice against it. However, both AT&T and DIRECTV are hopeful of the FCC nod by the end of Jun 2015.
AT&T currently carries a Zacks Rank #3 (Hold).
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