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AT&T Launches $48.5 Billion Takeover Bid for DirecTV

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Mergers in the USA, as AT&T has formally stated that it intends to buy DirecTV in a deal valuing the satellite television provider at USD48.5 billion.

The deal had been expected following a flurry of rumours over the past couple of weeks, and if approved by regulators would give AT&T a sizeable boost to its own landline based television services.

The offer to DirecTV shareholders is a third in cash and two thirds in AT&T shares. This purchase price implies a total equity value of $48.5 billion and a total transaction value of $67.1 billion, including debt.

AT&T expects cost savings to exceed $1.6 billion on an annual run rate basis by year three after closing. The expected synergies are primarily driven by increased scale in video.

"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," said Randall Stephenson, AT&T Chairman and CEO.

To help smooth the regulatory concerns, AT&T said that it will use cost savings from the merger to expand its plans to build and enhance high-speed broadband service to 15 million customer locations, mostly in rural areas where AT&T does not provide high-speed broadband service today.

This new commitment, to be completed within four years after close, is on top of the fiber and Project VIP broadband expansion plans AT&T has already announced.

For customers who only want a broadband service and may choose to consume video through an over-the-top (OTT) service such as Netflix or Hulu, the combined company will offer stand-alone wireline broadband service at speeds of at least 6 Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing.

AT&T also committed to Net Neutrality, for three years, regardless of whether it is allowed to drop that requirement following the recent FCC ruling on the matter.

The merger is expected to take a year to clear all the necessary regulatory hurdles, which is longer than usual, which is likely to be mainly due to DirecTV's Latin American operations.

Now that AT&T has made the definitive move to expand in the America's it pretty much kills off any speculation that the firm would make a bid for a European telco -- at least for the next year or two.

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Tags: at&t  directv  USA