Monday, July 6, 2015
AT&T-DirecTV and the Benefit of Multiple Requests
AT&T appears likely to secure all required governmental approvals of its $48.5 billion acquisition of DirecTV. AT&T has made multiple requests for acquisition authority of late and the odds of multiple “mother may Is” seems to work here. The company couldn’t get the needed authority to buy out TMobile and the wireless consumers are far better off in having a maverick innovator among the 4 carriers that pretty much control the nation’s wireless infrastructure. Most analysts think a merger of AT&T and DirecTV won’t matter much.
AT&T can make plausible arguments that the merged venture will not harm competition, or consumers even as it provides desirable diversification opportunities for both companies. The FCC and Justice Department will have to emphasize this prospect rather than dwell of the snarky and unnecessary threats by CEO Randall Stephenson that AT&T won’t invest in next generation network infrastructure because of burdensome network neutrality obligations and general notions of regulatory uncertainty. See Washington Post, AT&T is putting its fiber deployment on ice over net neutrality — for now (Nov. 12, 2014)available at: https://www.washingtonpost.com/blogs/the-switch/wp/2014/11/12/att-is-putting-its-fiber-deployment-on-ice-over-net-neutrality-for-now/.
So AT&T has ample retained earnings and borrowing options to shell out $48.5 to buy out a content competitor, but the marketplace is too risky to invest in plant? Apparently it makes financial sense to buy market share and diversify content distribution technologies rather than extend the geographical market coverage of AT&T’s hybrid fiber optic/copper U-verse network.
AT&T is neither a maverick, nor an innovator. Its interest in DirecTV may evidence backward, or status-quo thinking. In the worst case, AT&T will have bought a venture whose one service will decline in value and market share over the next few years. If cord cutting and shaving picks up momentum in the wired cable television environment, won’t subscriber churn increase for the satellite alternative to cable? Or will exclusive rights to some NFL football games pay for the deal?
Does it make sense to double down on an incumbent medium, rather than emphasize new media opportunities? The managers at AT&T appear keen on hedging their bets by embracing old media even as technological and market convergence point elsewhere.