The chief executive of AT&T says one of the primary objectives of the company in its proposed $48.5 billion acquisition of DIRECTV is to deliver video to any screen. AT&T was a winning bidder in recent mobile spectrum licences, for which it will pay over $18 billion. It is part of a high stakes strategy for growth based on combining television and video with fixed and mobile broadband.
Randall Stephenson, the chairman and chief executive of AT&T, told analysts the company expected to achieve even greater synergies than originally anticipated with the proposed acquisition of DIRECTV. He expects the deal to close in the first half of 2015, subject to regulatory approval.
“Today our customers are expecting us to deliver video across all of our platforms whether it’s traditional linear video or over the top on U-verse broadband or video to the mobile device.”
He said that AT&T would be a very different company following the planned acquisition of DIRECTV.
“We’ll be a company with the ability to deliver video to any device. We’ll have a unique capability to integrate solutions across the diversified base of customers, geographies and technology platforms that are mobile, fast and highly secure and we will have a path to profitable TV growth.”
A multiscreen strategy not only deals with the perceived consumer demand to be able to view video on any device or display, it could dramatically expand the number of video subscribers, through cross selling to existing mobile and broadband customers.
AT&T has 5.92 million television subscribers. The company gained 73,000 U-verse TV subscribers in the fourth quarter of 2014. The sale of its Connecticut wireline operations to Frontier, including approximately 197,000 U-verse TV customers, resulted in its first quarterly decline in television subscribers, with a net reduction of 125,000.
Furthermore, AT&T has over 120 million wireless connections, including over 75 million monthly subscribers. It has a further 14 million consumer broadband connections, of which around 40% currently take its video service.
AT&T has also bid $18.2 billion for a further slice of spectrum with near nationwide coverage across the United States.
“Growth in our customers’ mobile data usage continues to explode, driven by mobile video traffic,” said John Stankey, the chief strategy officer for the company. “This spectrum investment will be critical to AT&T staying ahead of customer demand and facilitate the next generation of mobile video entertainment.”
Verizon bid a total of $10.43 billion in the AWS-3 spectrum auction, for licences covering over 60% of the population of the United States.
Dish Network, through its designated partnerships, bid a total of just under $10 billion, demonstrating the importance the satellite television company attaches to mobile spectrum.
The telecommunications companies have consistently been winning video customers, competing against cable companies that have generally been losing market share.
Verizon added 116,000 FiOS television subscribers in the fourth quarter of 2014, taking its total to 5.65 million.
AT&T will leap ahead with the planned acquisition of DIRECTV, giving it around 26 million television subscribers in the United States.
DIRECTV, which has yet to announce its results for 2014, had 20.20 million television subscribers in the United States at the end of the third quarter, a number that slipped slightly over two quarters as a result of intense competition.
Its Latin America operations add 12.35 million subscribers to Sky Brasil and PanAmericana. Sky Mexico, in which it has a 41% stake, has a further 6.52 million subscribers.
While the proposed merger of Comcast and Time Warner Cable would place the combined operation at the top of the informitv Multiscreen Index of pay-television services worldwide, AT&T would have a larger overall subscriber base, taking into account the services in Latin America.
With the opportunity for AT&T to cross sell video to its existing mobile customers, there is also potential for further growth, even in the highly saturated market of the United States.