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Mon May 19, 2014
Business

AT&T To Buy DirecTV In Nearly $50 Billion Deal

Originally published on Tue May 20, 2014 7:46 am

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Transcript

RENEE MONTAGNE, HOST:

It's MORNING EDITION, from NPR News. Good Morning. I'm Renee Montagne.

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And I'm David Greene.

If you've streamed a movie or a TV show recently, you are part of the problem facing cable and satellite providers. These companies are facing more and more competition from Internet streaming, and to survive, some are consolidating.

Yesterday, AT&T announced that it is buying a satellite TV provider DirecTV. The deal - which still needs to be approved by government regulators - would be worth nearly $50 billion.

Here's NPR's Jim Zarroli.

JIM ZARROLI, BYLINE: The merger will unite one of the nation's most powerful telecommunications companies with one of its leading pay-TV services. Together, the two companies will have 26 million pay-TV customers. And the deal will allow AT&T to offer a much more varied menu of services to potential customers, says telecommunications consultant Roger Entner.

ROGER ENTNER: Well, it positions them as probably the most complete integrated telecommunications provider in the U.S., because they can provide a nationwide bundle that consists of voice Internet and TV services.

ZARROLI: The merger comes at a time when growth is slowing for a lot of traditional media companies. Consumers increasingly are turning away from cable and satellite and getting video content over the Internet. Big media companies are struggling to adjust by redefining themselves. In February, Time Warner Cable and Comcast announced plans to merge in a deal that would strengthen Comcast's position as the largest cable company. The deal hasn't yet been approved by regulators. But Harold Feld, senior vice president at the advocacy group Public Knowledge, says it's generated a lot of fear in the media business.

HAROLD FELD: This has triggered this sort of reaction in the industry of oh, my God. They're going to get so big the only way we're going to be able to stand our ground is if we can bulk up ourselves. It's kind of like trying to find a date before the prom. The more people get picked off, the more desperate everybody else becomes to try to find somebody they can go to the dance with.

ZARROLI: Although DirecTV and AT&T have been talking about a merger for along time, the prospect of a Comcast-Time Warner deal apparently pushed them to the altar. The deal announced this weekend will make AT&T a much more powerful player in the media business. It will have much more sway with content providers, and it will be better able to negotiate deals to show movies and TV programs over broadband services. But Feld says this spate of mergers isn't necessarily a good thing for consumers.

FELD: As you get fewer and fewer bigger and bigger players, there is less pressure on any of them to pass on any of these savings to consumers.

ZARROLI: That view was echoed yesterday by other consumer groups, who are alarmed by the ongoing consolidation in the media. But antitrust attorney David Balto says this deal actually could benefit consumers because of its impact on DirecTV. As a satellite company, DirecTV has seen its growth slow, and without a competitive broadband service, it's been at a disadvantage against cable companies. Now, Balto says it's merging with a telecommunications giant that has very deep pockets.

DAVID BALTO: I think it's going to make DirecTV a much stronger competitor, and this is a marketplace where we want to see the level of competition strengthened.

ZARROLI: By acquiring DirecTV, AT&T will also gain access to its 20 million customers. Among other things, they represent a rich source of cash for AT&T. That's money it can use to invest in broadband services, and that could help it on the regulatory front.

Critics worry that the merger of Comcast and Time Warner Cable will create a behemoth that will crush competitors, and federal regulators are trying to decide whether that merger should be allowed.

Now, along comes a second deal that will create a much stronger competitor against Comcast, and that's likely to make the deal announced this weekend easier for federal regulators to swallow.

Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.