Consolidation Continues: AT&T Acquires DirecTV for $48.5 Billion

AT&T is acquiring DirecTV, you know, just like we told you yesterday.  The deal is valued at $48.5 billion (or $67.1 billion with debt), with AT&T paying $95 per share, comprised of $28.50 per share in cash and $66.50 per share in AT&T stock. Clearly this deal allows AT&T to expand its product offering to now venture into video, specifically TV.  In the same vein, it allows DirecTV to offer its customers more in the name of Internet access and phone service.

“This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens – mobile devices, TVs, laptops, cars and even airplanes. At the same time, it creates immediate and long-term value for our shareholders,” AT&T Chief Executive Stephenson said in a statement.

What’s interesting is the announcement also explicitly emphasizes that the new partners are committed to net neutrality despite all the recent FCC happenings. The two companies will demonstrate “continued commitment for three years after closing to the FCC’s Open Internet protections established in 2010, irrespective of whether the FCC re-establishes such protections for other industry participants following the DC Circuit Court of Appeals vacating those rules.” (These are the rules that were recently struck down and only impact Comcast at the moment due to that company’s previous merger with NBCU.)

This deal is likely the first of many more like it as we start to see more consolidation in this space turning existing industry giants into mega-conglomerates.  We already have another multi-billion dollar deal pending, that being the $45 billion-dollar Comcast-Time Warner Cable merger.  And then there is the potential deal between Sprint and T-Mobile for $30 billion that is supposed to happen later this summer.  In total, between these three deals alone, we are looking at acquisitions totaling around $125 billion, with millions and millions of customers being affected.

Of course, we this AT&T-DirecTV deal still needs regulatory approval — just like the Comcast-Time Warner deal.  And regulatory approval is far from certain. Both deals face a tough fight in front of the Department of Justice, as consolidation has narrowed control of the pay-TV distribution landscape to a handful of companies.  It is extremely likely that part of the reason why AT&T and DirecTV moved so swiftly to conclude their deal was to get it in front of regulators for review simultaneously with the Comcast-Time Warner Cable transaction, with the thinking being that if officials approve that deal they will have to also approve this one.