AT&T Inc. (NYSE:T), the second largest wireless carrier in the United States contacted DIRECTV (NASDAQ:DTV) regarding the possibility of entering an acquisition agreement, according to report from Wall Street Journal based on information from people with knowledge about the matter.
Potential acquisition price
The report indicated that a transaction between the wireless carrier and the satellite TV service provider will likely worth $40 billion. DIRECTV (NASDAQ:DTV) currently has a market capitalization of approximately $39.5 billion while AT&T Inc. (NYSE:T) has around$185. 5 market cap.
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DIRECTV is the second leading satellite TV service provider in the United States with approximately 20 million customers. AT&T Inc. (NYSE:T) is currently offering a landline-based TV service with around 5.7 million customers.
Combining the company will create a huge pay television service with nearly 26 million customers, which is nearly similar to the size of Comcast Corporation (NASDAQ:CMCSA) when combined with Time Warner Cable Inc (NYSE:TWC). Comcast’s proposal to acquire Time Warner Cable is still in the process of getting regulatory approvals.
DIRECTV open to a deal
According to one of the sources of the Wall Street Journal, DIRECTV (NASDAQ:DTV) is open to a potential transaction, but it uncertain whether it has a serious negotiation with AT&T Inc. (NYSE:T).
The players in the U.S. satellite TV industry are facing challenges particularly in increasing its subscribers. The industry is already mature and around 90% of households in the country are already cable or satellite TV, or phone company-delivered television service subscribers. Another challenge confronting satellite TV service providers is their lack of competitiveness in terms of providing a fast and reliable internet access
AT&T mulls acquisition for years
For years, there had been speculations that AT&T Inc. (NYSE:T) is interested in acquiring a satellite television service provider to expand its business. Acquiring DIRECTV (NASDAQ:DTV) will allow AT&T to bundle its wireless and TV services, and deliver video to its mobile and broadband customers in new ways.
AT&T Inc. (NYSE:T) has an existing partnership with DIRECTV (NASDAQ:DTV) in certain areas to offer its broadband service only. Many believed that a merger between the companies will definitely face tough regulatory scrutiny. More than ten years ago, DIRECTV and DISH Network Corp (NASDAQ:DISH) tried to merge, but it was rejected by regulators.