AT&T Inc.’s share price up, in talks with DirecTV over an eventual acquisition to expand reach in satellite-TV business

According to people with knowledge of the process, who asked not to be identified, the second-largest mobile-phone carrier in the U.S. – AT&T Inc. has approached the satellite-television company DirecTV on the matters of an eventual acquisition. Such a step is considered beneficial to AT&T, because it will provide it with the opportunity to significantly expand its reach in the recently stabilizing pay-TV business.

It is not clear yet if the companies are in a process of more specific negotiations, but DirecTV has been considering an eventual agreement by a person close to the negotiations. According to the unidentified source, the acquisition would probably amount to at least 40 billion dollars.

If the purchase is finalized, the new entity would be of a comparable size as the one Comcast Corp. is to reach after its merger with Time Warner Cable Inc. , if the deal is completed.

Currently, DirectTV has about 20 million paying subscribers. Its market capitalization is estimated to more than 39 billion dollars. The number of customers AT&T is serving is estimated to about 5.7 million people. The combined company is expected to have more than 25 million subscribers, which is going to make it one of the major rivals of Comcast Corp. The latter would have about 30 million customers after its merger with Time Warner Cable.

Over the last few years, there have been rumours about the intention of AT&T Inc. to purchase a satellite television provider in order to expand its reach. The company already sells its service in a vast range of areas in cooperation with DirecTV. The company seemed to be focused on expanding its reach in Europe, but as its Chief Executive Officer Mr. Stephenson said earlier in 2014, it has shifted its focus into a different direction due to the proposed merger between Comcast and Time Warner Cable.

As the Wall Street Journal reported, Mr. Randall Stephenson said: “It’s an industry redefining deal from our standpoint.”

If the rumours of a future acquisition prove to be true, the deal between AT&T and DirecTV would probably be subject to approval by both the Federal Communications Commission and the U.S. Justice Department, which barred a deal between DirecTV and Dish Network Corp. twelve years ago.

AT&T Inc. refused to make any comments on the rumours of the negotiations. The official representatives of DirecTV also declined to comment on the matter.
AT&T Inc. added 0.79% to close at 35.70 dollars per share yesterday, marking a one-year change of -4.70%. According to the information published on CNN Money, the 24 analysts offering 12-month price forecasts for AT&T Inc. have a median target of 35.00, with a high estimate of 42.00 and a low estimate of 25.00. The median estimate represents a -1.96% decrease from the last price of 35.70.