May 19 - AT&T's proposed buyout of DirecTV will give it cash, international reach and coveted programming but also added regulatory scrutiny. Jeanne Yurman reports.
AT&T is determined not to be left out of the shrinking media industry. Regulators vetoed its pursuit of T Mobile. So it trumpeted Monday that it's going after the country's top satellite TV provider, DirecTV, instead for just under $49 billion. Many analysts question the pursuit of a stagnant industry like satellite TV. Bundling DirecTV's video with AT&T's broadband and voice makes for a stronger, more competitive service. But given the awesome expense of expanding broadband networks, AT&T wants something else says Jim Nail of Forrester Research. SOUNDBITE: JIM NAIL, PRINCIPAL ANALYST, FORRESTER RESEARCH (ENGLISH) SAYING: "This is a way for them to get their hands on some cash to help accelerate the build out that they need to do, to grow their footprint and get the kind of scale where they can compete with those established cable players." DirecTV spins off roughly $2.5 billion in free cash flow a year. An AT&T, DirectTV merger could also add 15 million broadband customers mostly in rural areas adding to AT&T's current 11 million. And, as Tuna Amobi of S&P Capital I.Q. points out, the deal grows its footprint abroad. SOUNDBITE: TUNA AMOBI, MEDIA & ENTERTAINMENT ANALYST, S&P CAPITAL I.Q. (ENGLISH) SAYING: "I think the potential for DirecTV Latin America to be united with AT&T, obviously you talked a lot about the paid TV opportunities in the pay TV market in Latin America, which is so well underpenetrated relative to the U.S. So you can almost imagine, you know, a scenario where AT&T is going to use that as a platform potentially to roll up additional operators in some kind of consolidation in that market." Buying DirecTV also means a potential $1 billion generated each year through a contract to broadcast NFL Sunday Ticket - a key marketing advantage over other cable operators. Yet, a mash-up of these two companies is very uncertain. If the NFL contract is not renewed, AT&T could back out of the deal. And AT&T will have to have some pretty long legs to clear the regulatory hurdles. SOUNDBITE: TUNA AMOBI, MEDIA & ENTERTAINMENT ANALYST, S&P CAPITAL I.Q. (ENGLISH) SAYING: "For consumers it means clearly less choice and I think that's the main challenge these deals are going to find with regulators despite the concessions both sides have offered." If the government gives its go-ahead to Comcast's buyout of Time Warner Cable and the DirecTV buyout, the media industry would boil down to roughly five major players - a prospect that experts say will cause added scrutiny now for both deals.