AT&T Inc. today agreed to buy DirecTV for $48.5 billion, or $95 per share, a move that gives the telecommunications company a larger base of video subscribers and increases its ability to compete against Comcast and Time Warner Cable, which agreed to a merger in February. AT&T's proposed combination, which is subject to government review, could improve its Internet service by pushing its existing U-verse TV subscribers into video-over-satellite service, and thereby free up bandwidth on its telecommunications network.
The combined AT&T-DirecTV entity would serve 26 million customers and become the second-largest pay TV operator behind a combined Comcast-Time Warner Cable, which would serve 30 million. The deal could face tough scrutiny from the FCC and antitrust regulators at the Department of Justice. Unlike Comcast Corp. and Time Warner Cable—which don't compete in the same territory—AT&T's U-verse, offered in 22 states, does compete directly for TV customers with DirecTV, which is available nationwide. The combination would reduce consumers' options for pay TV providers from four to three for about 25% of US households, analysts say, and may result in higher prices—a situation that usually gives regulators cause for concern. Click for more on the story.