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 The newly expanded AT&T leapfrogs the biggest U.S. cable company
Comcast Corp. The company said it will serve more than 26 million
U.S. customers and more than 19 million in Latin America, making it
the world's biggest pay-TV company.
After more than a year of review, the Federal Communications
Commission finalized its vote to approve the deal with conditions,
imposed for four years and enforced by an internal and an external
compliance officers.
The requirements from the FCC, which ensures that deals are in the
public interest, include protections for rival video and pledges to
expand high-speed Internet services to schools, low-income Americans
and other customers.
The Justice Department gave its nod to the merger on Tuesday, saying
that its antitrust review found no significant risks to competition.
"The conditions imposed by the Commission address potential harms
presented by the combination," the FCC said in a statement. "The
conditions also ensure that the benefits of the merger will be
realized."
With the merger, DirecTV gets the broadband product it previously
lacked, and AT&T gets new avenues of growth beyond the maturing
wireless service.
AT&T shares were up 1.1 percent at $34.29 and DirecTV shares were up
1.5 percent at $93.55 at the market close.
"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," AT&T Chairman and CEO
Randall Stephenson said in a statement.
As the U.S. wireless market reaches saturation, AT&T hopes to tap
into DirecTV’s business and has been expanding its footprint in
Mexico after buying the third and fourth largest wireless carriers
in that country recently.
When the deal was first announced, analysts questioned the move.
DirecTV's satellite TV business was hit by stagnation affecting the
broad pay-TV market as viewers increasingly shift to watching videos
on mobile devices.
Since then, they have warmed to the idea that AT&T could benefit
from DirecTV’s robust cash flow and customer base of 20.4 million.
The company has said it expects annual cost savings from the deal of
at least $2.5 billion by the third year.
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The success of the deal in passing regulatory muster is in sharp
contrast to rival telecom mega-merger of Comcast and Time Warner
Cable Inc, which was rejected in April largely over the combined
companies' reach into the broadband market.
Video companies Netflix Inc and Dish Network Corp, traffic company
Cogent Communications Holdings Inc and others had fought for the FCC
to reject the $45 billion Comcast merger, but took a more lenient
tack with AT&T.
The companies pushed for limitations to AT&T’s power to slow down or
charge fees for the web traffic traveling through its networks, as
well as protections for competing video services.
The issues are addressed by the FCC's conditions with requirements
for AT&T to count its own affiliated video services toward any data
caps on fixed broadband connections and to share with the FCC all
traffic exchange agreements it strikes with content and web transit
companies.
AT&T also pledged to the FCC's to build out high-speed Internet
connections to 12.5 million customer locations and to sell
affordable broadband access to low-income Americans without bundling
it with TV services.
And in a first for the FCC, the agency will require AT&T to
establish an internal and an independent external compliance
officers to ensure AT&T abides by the conditions.
(Reporting by Alina Selyukh; Additional reporting by Malathi Nayak
in New York; Editing by Sandra Maler and David Gregorio)
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