AT&T Completes $49 Billion Acquisition Of DirecTV, Numerous FCC Strings Attached

It's official -- AT&T is now the proud owner of DirecTV, making it the largest pay TV provider in the U.S. and the world. The $49 billion acquisition bumps AT&T's customer base in the U.S. to 26 million, along with 19 million customers in Latin America, including Mexico and the Caribbean. It also makes AT&T and mega-force in the sports world.

DirecTV enjoyed exclusive rights to NFL Sunday Ticket, an add-on that allows customers to watch every out-of-market NFL game on their TVs, mobile devices, and PCs. As a DirecTV subscriber myself and displaced Boston sports fan, NFL Sunday Ticket has allowed me to follow the New England Patriots. It's a popular service, and a huge win for AT&T.

The telecom also owns Root Sports, which is a regional sports network, and also has stakes in The Tennis Channel, MLB Network, NHL Network, and GSN (Game Show Network), all of which came as a result of the DirecTV acquisition.


"Combining DirecTV with AT&T is all about giving customers more choices for great video entertainment integrated with mobile and high-speed Internet service," said Randall Stephenson, AT&T chairman and CEO. "We’ll now be able to meet consumers’ future entertainment preferences, whether they want traditional TV service with premier programming, their favorite content on a mobile device, or video streamed over the Internet to any screen.

"This transaction allows us to significantly expand our high-speed Internet service to reach millions more households, which is a perfect complement to our coast-to-coast TV and mobile coverage," Stephenson continued. "We’re now a fundamentally different company with a diversified set of capabilities and businesses that set us apart from the competition."

Though the FCC ultimately gave AT&T the green light on the deal, it came with several conditions that are applicable for the next four years. They are as follows:

• Within 4 years, AT&T will offer its all-fiber Internet access service to at least 12.5 million customer locations, such as residences, home offices and very small businesses. Combined with AT&T’s existing high-speed broadband network, at least 25.7 million customer locations will have access to broadband speeds of 45Mbps or higher.
• Within its wireline footprint, the company will offer 1Gbps service to any eligible school or library requesting E-rate services, pursuant to applicable rules, within the company’s all-fiber footprint.
• Within AT&T’s 21-state wireline footprint, it will offer discounted fixed broadband service to low-income households that qualify for the government’s Supplemental Nutrition Assistance Program. In locations where it’s available, service with speeds of at least 10Mbps will be offered for $10 per month. Elsewhere, 5Mbps service will be offered for $10 per month or, in some locations, 3Mbps service will be offered for $5 per month.
• AT&T’s retail terms and conditions for its fixed broadband Internet services will not favor its own online video programming services. AT&T can and will, however, continue to offer discounted integrated bundles of its video and high-speed Internet services.
• AT&T must submit to the FCC new interconnection agreements it enters into with peering networks and on-net customers for the exchange of Internet traffic. The company will develop, in conjunction with an independent expert, a methodology for measuring the performance of its Internet traffic exchange and regularly report these metrics to the FCC.
• AT&T will appoint a Company Compliance Officer to develop and implement a plan to ensure compliance with these merger conditions. Also, the company will engage an independent, third-party compliance officer to evaluate the plan and its implementation, and submit periodic reports to the FCC.

DirecTV shareholders made out pretty well in the deal, receiving 1.892 shares of AT&T common stock and $28.50 in cash, per share of DirecTV.