AT&T to purchase DirecTV in $49B deal

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AT&T (NYSE: T) agreed to purchase DirecTV (NASDAQ: DTV) in a $49 billion deal that will make the telecom company a major powerhouse in the pay-TV market. AT&T will gain DirecTV's 20 million U.S. subscribers as well as access to a portfolio of content that AT&T will be able to distribute across mobile, video and broadband platforms.

AT&T said it will purchase DirecTV in a stock-and-cash transaction at $95 per share, which is based upon AT&T's Friday closing price. The purchase price implies a total equity value of $48.5 billion and a total transaction value of $67.1 billion, including DirecTV's net debt.

Both companies' boards of directors have approved the deal. However, the transaction must still be approved by the FCC,  the U.S. Department of Justice, a few U.S. states and some Latin American countries. The acquisition is expected to close in around 12 months.

AT&T said it will divest its interest in America Movil in order to secure regulatory approval in Latin America, where DirecTV has more than 18 million subscribers. AT&T's designees to the America Movil board of directors will resign immediately.

The combined company will have 26 million pay-TV subscribers in the United States, including AT&T's U-verse video customers. AT&T said it will use the merger to deliver high-speed broadband service to 15 million customers, primarily in rural areas where the company does not provide high-speed service today. This will be on top of the company's existing Project VIP broadband expansion plans that have already been announced.

In addition, AT&T said it plans to offer wireline broadband service at speed of at least 6 Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing.

The AT&T/DirecTV deal comes just three months after Comcast's (NASDAQ: CMCSA) $45.2 billion agreement to buy Time Warner Cable (NYSE: TWC). Experts say that these mega-mergers are a result of the changing media landscape. Companies like AT&T and Comcast are looking for ways to continue to grow their pay-TV businesses and respond to the growth in streaming video and mobile video.

For more:
- see this release
- see this New York Times post
- see this Washington Post article

Related articles:
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DirecTV reportedly enlists Goldman Sachs for talks with AT&T
Dish Network boss Ergen dashes DirecTV merger, acquisition speculation
DirecTV: Time Warner Cable Dodgers deal 'far above any rational view of the market'
DirecTV boosts U.S. revenues to $6.09B, but net income declines

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