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Wall Street Confused, Unimpressed by AT&T's DirecTV Bid
by Karl Bode 12:44PM Wednesday May 14 2014
So why is AT&T rumored to be buying DirecTV in a deal estimated to be worth $50 billion? To hear USAToday tell it, it's because AT&T wants to bundle satellite TV service with DSL in areas they don't sell U-Verse TV, but somebody apparently forgot to tell the news outlet that AT&T is busy hanging up on most of these users because they don't want to upgrade them, making that theory less likely.

Perhaps they're just really excited to get into the satellite TV business? Except the satellite business isn't a high growth market, it's a highly saturated market meaning no real subscriber growth in TV user additions in the foreseeable future.

Even investors, traditionally always hungry for a good M&A, don't really understand what AT&T's doing. Craig Moffett, who we've historically made fun of for his unabashed love of usage caps and hatred of network investment, tells Bloomberg News he doesn't really see the point in the deal noting that satellite is a no-growth business.

"We believe AT&T is better served preserving its balance sheet for upcoming wireless auctions, and continued investment in next generation wireless and wireline products," Jefferies analyst Mike McCormack also states in a report.

So what is AT&T really doing? Well for one, the company hasn't officially announced anything so this deal may never happen. But being AT&T, the most likely explanation is that, like T-Mobile, they're spending big money in order to eliminate a pay TV competitor from the market, and trying to grow simply for the sake of growing. It's not like that money needs to go back into the company's wireless or fixed-line networks, right?

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Alakar
Facts do not cease to exist when ignored

join:2001-03-23
Milwaukee, WI

1 recommendation

It's not surprising

AT&T (formerly SBC, formerly SWBC) hasn't had a plan for growing their business (outside of acquiring other companies) for a long time. I worked for Ameritech when we were bought up by SBC. We went from a company that had definite plans for capital investment to grow different markets to a company with no clear goal, no integration plan, and backwards business practices. From my friends that still work there, they haven't changed. They are making profits, but most of that is at the expense of their company infrastructure and employee cuts. If they don't keep buying companies, their neglect will catch up with them.
--
“Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge.'” Isaac Asimov

djrobx
Premium
join:2000-05-31
Valencia, CA
kudos:2
Reviews:
·Time Warner Cable
·VOIPO

Sorry, but I disagree Karl

but somebody apparently forgot to tell the news outlet that AT&T is busy hanging up on most of these users because they don't want to upgrade them, making that theory less likely.

To the contrary, AT&T seems to be putting a great deal of effort putting lipstick on the CO-based DSL pig. They're migrating ADSL users to a new "ADSL2+" IP-DSLAM network and re-branding it "U-verse". It requires new customer equipment that AT&T has to furnish at no charge. If they planned to "just hang up" on users as you propose, why would they bother with all of this?

Currently, the tell-tale sign that you do not have "real" U-verse available is that you can't get AT&T's TV service. AT&T currently partners with DirecTV for these cases.

David
I start new work on
Premium,VIP
join:2002-05-30
Granite City, IL
kudos:100
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Karl,

Doesn't this rumor of us buying Directv seem to shake loose every few years? I think you have did articles on this a while back and nothing ever pans out from it.
--
02/24/14- My hours recently changed. I work 11:30 A.M. to 10 P.M. central time. I am not in the office on friday, saturday, or sunday. Thanks-David

ptrowski
Got Helix?
Premium
join:2005-03-14
Putnam, CT
kudos:4

Re: Karl,

True, but it seems like this time it has more legs to it and is being reported widely. But then again until anything official is announced it's all talk.

David
I start new work on
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join:2002-05-30
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·magicjack.com
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Yea but the last one had legs too and nothing ever panned out from that one either, and in that prior article he actually mentioned a prior article of his in the past.

Keep in mind I am not blasting anyone or saying it will or won't happen. I am no better at predicting the future than anyone else. I am just saying this story crops up every 2-3 years.
--
02/24/14- My hours recently changed. I work 11:30 A.M. to 10 P.M. central time. I am not in the office on friday, saturday, or sunday. Thanks-David
josephf

join:2009-04-26

AT&T / TCI Cable Merger

Does anyone remember that the old AT&T purchased TCI, the largest U.S. cable company at the time, in 1999. It was the great merger of the time. Years later they sold it to... Comcast.
tkdslr

join:2004-04-24
Pompano Beach, FL

Re: AT&T / TCI Cable Merger

Add in Media One, and Prime Cable, where AT&T spent 100B$, only to sell it to Comcast for 47.5B$ a few years later.

tigerpaw509

join:2011-01-19
At a huge loss....

brookeKrige

join:2012-11-05
San Jose, CA
kudos:3

Clout negotiating to carry channels? Pillage satellite BW?

Adds more TV subscribers, giving greater aggregate size when negotiating rates with TV channels/networks?

Could decimate DirectTV picture quality (to u-verse levels), in order to reallocate satellite bandwidth. If true that ATT uses sat. to distribute TV feeds to regional nodes upstream of VRADs, for their own (wired) u-verse TV subscribers? (Or is this apples and oranges: incompatible satellite technology)?
davidhoffman
Premium
join:2009-11-19
Warner Robins, GA
kudos:2

Re: Clout negotiating to carry channels? Pillage satellite BW?

It would be a severe degradation of signal quality for DirecTV subscribers. Every spot beam from a DirecTV satellite would now have to do double the work. Each beam has only so much of a data transfer rate. You could essentially cut the bit rate by 50% for DirecTV subscribers in order to use the spot beam to feed U-verse. How long would the DirecTV subscribers stay with that kind of picture quality loss? Dish Network would be delighted to see DirecTV change the DirecTV picture quality to something equivalent to snowy and ghosty NTSC analog.
15444104
Premium
join:2012-06-11

Money down the drain???

It's really discouraging to think that AT&T spent hundreds of billions of dollars years ago on cable companies that COULD have been spent on their core business and used to continue to build out and improve their fiber lines.

The DirecTV rumor, if true once again seems like spending good money after bad.

Just think how much further along AT&T would be with U Verse or FTTH if they had invested this money properly....


Alakar
Facts do not cease to exist when ignored

join:2001-03-23
Milwaukee, WI

1 recommendation

Re: Money down the drain???

said by 15444104:

It's really discouraging to think that AT&T spent hundreds of billions of dollars years ago on cable companies that COULD have been spent on their core business and used to continue to build out and improve their fiber lines.

That was a different company. AT&T today is SBC. SBC bought what was left of the old AT&T and took the AT&T name.
--
“Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge.'” Isaac Asimov
ocjosh

join:2013-03-19
united state
Reviews:
·Verizon FiOS
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Another thought

AT&T can
1. bundle DSL or LTE service into current DirecTV customers.
2. become a bigger competitor of Dish Networks' future fixed-LTE expansion using another potential satellite technologies or fiber. They will target at the same market, a bigger one.
3. AT&T seems have no direct deal with cable operators like Verizon, they can just compete across the regions.
4. control the channels availability on their offering shelves is a powerful thing to interfere with public opinion. They have invisible hands to control what to be offered to general public.

michieru
Premium
join:2009-07-25
Miami, FL
Reviews:
·Comcast Business..

Just a thought

1. Exede
2. Provides them a TV business with a nitch "Sunday Ticket"
3. Force all home dsl clients to Exede who are in packages of 12Mbps or lower via special pricing.
4. Owning Directv fixes the U-Verse TV problem for clients who are far from the telco and don't have the speed for TV.
5. Blanket AT&T internet/TV service across the U.S as the marketing campaign.
6. Install Gigapower to only apartment buildings/high rises in which the ROI is greatest.
7. Satellite connectivity with low bandwidth requirements (such as car navigation or radio) are now possible and kept within the network.

I see plenty of reasons why the DirecTV deal makes sense.

Slowverse

join:2012-02-01
Mobile, AL
Reviews:
·AT&T Southeast

Re: Just a thought

said by michieru:

1. Exede
3. Force all home dsl clients to Exede who are in packages of 12Mbps or lower via special pricing.
6. Install Gigapower to only apartment buildings/high rises in which the ROI is greatest.

I see plenty of reasons why the DirecTV deal makes sense.

They can try to force me to Exede! I would do without rather than deal with the latency and bandwidth constraints.

AT&T SUCKS!
silbaco
Premium
join:2009-08-03
USA
Exede is ViaSat, not DirecTV.
elray

join:2000-12-16
Santa Monica, CA
Reviews:
·Time Warner Cable
·EarthLink

Marketing

USA Today is correct.

This is AT&T making sure it can offer bundled packages to Karl's "unupgraded" franchise customers, including those who might be migrated to fixed-wireless options.

AT&T is better than any at promoting their bundles, buying-the-business from customers who should know better.
Bob61571

join:2008-08-08
Washington, IL
Reviews:
·Frontier Communi..

Competition Laughing at AT&T-DirecTV Deal:Bibb (Bloomberg)

from Bloomberg business channel group discussion,

»www.bloomberg.com/video/competit···~_Q.html

Porter Bibb of Mediatech Capital Partners says that "I think that the competition is laughing right now because I think that it's really, really hard to find the strategic rationale in this transaction."
Why? Points made by Bibb and Alex Sherman of Bloomberg.
1) Satellite TV business is fading now.
2) Argument that it gives them leverage in acquiring content. That's not the issue.
3) They can't take broadband the way the cable guys do.
4) Hard to find synergies in this deal.
5) A deal for Dish Networks makes more sense.
6) Deal makes sense from DirecTV's perspective, since they are selling out at a much higher price than AT&T was offering a few years back. DirecTV needs an exit plan.
7) This is a harder sell for AT&T to its shareholders.
8) AT&T has tried a half dozen different strategies, none of which has worked.
9) Why doesn't AT&T's Randall Stephenson take the $50 billion(that this DirecTV buy will cost) and build out the wireless and WiFi network?
10) This DirecTV deal would have been a lot cheaper for AT&T in 2010(when they looked at it) than now.
11) DirecTV has looked at various options to acquire others like Hulu. Maybe selling out is their best option.
captinkirk

join:2012-12-12
Bourbonnais, IL

Lets put on the Tin Foil Hat

What if ATT was making a Bid at Directv to get Dish interested in a merger with them under the table.

Meaning the deal with DirecTV never goes through but a deal with Dish happens.

Why?

Because Charlie Ergen owns a boat load of spectrum. So ATT could be making a play at DirecTV to bring Dish to the table so they can acquire Dish and the spectrum that Echostar (Dish's parent company) owns. Something to make you just think a bit!
compton

join:2002-02-08
Brooklyn, NY

Re: Lets put on the Tin Foil Hat

said by captinkirk:

What if ATT was making a Bid at Directv to get Dish interested in a merger with them under the table.

Meaning the deal with DirecTV never goes through but a deal with Dish happens.

Why?

Because Charlie Ergen owns a boat load of spectrum. So ATT could be making a play at DirecTV to bring Dish to the table so they can acquire Dish and the spectrum that Echostar (Dish's parent company) owns. Something to make you just think a bit!

Charlie Ergen would only do that if he can be in control of the combined companies. So, that's not it.

KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK

Eliminating competition IS the plan

If you can control DBS you have eliminated the main competitor to your video offerings for MANY people.
tmc8080

join:2004-04-24
Brooklyn, NY

$$$ by the pound

isn't it interesting that AT&T seems to have money to throw around on just about everything BUT fiber to the residential home...

sprint can buy tmobile with Japanese Yen, but can't create a national footprint or lower prices to compete..

Ceraph

@50.180.81.x

Deal maybe good for AT&T but it's bad for everyone else

AT&T lacks a real plan for organic growth. Their entire focus appears to growth through acquisition rather than innovation and this will hurt the company in the long term. I do feel for the employees of DirectTv. Once the mothership gets their hands on the cash flow, the directtv employees will be shown the door - quick, fast, and in a darn hurry. It happened to the Bellsouth folks, and it will happen to them. Moreover, expect customer service to take a nose dive once the "integration" of operations begins. Those of us in the SE witnessed a quality of service drop as soon as the merger with BellSouth was completed.