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AT&T to buy DirecTV for $48.5 billion, countering Comcast and Time Warner merger

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AT&T agreed on Sunday to buy the satellite television operator DirecTV for $48.5 billion, trying to tilt the balance of power with media companies as the market for broadband Internet and video shifts, according to the New York Times, which broke the story on Sunday. This is the latest sign that the wireless industry and the U.S. television market are set to converge as customers consume more video on their mobile devices.

AT&T is offering $95 per DirecTV share in a combination of stock and cash, a 10 percent premium over Friday's closing price of $86.18. It will finance the cash portion, $28.50 per share, with funds on hand, asset sales and financing already lined up.

The transaction has a total value of $67.1 billion, including the assumption of DirecTV's net debt.

To help its case with regulators, AT&T will sell its roughly 8 percent stake in Carlos Slim's America Movil, worth roughly $5 billion. DirecTV has some 18 million customers throughout Latin America.

AT&T and DirecTV made their announcement just a few months after Comcast Corp offered $45 billion for Time Warner Cable Inc., a transaction that would create the leading U.S. cable and broadband Internet powerhouse. That merger would combine the largest two U.S. cable companies in what would be "an all-stock deal. “The Comcast proposal is now awaiting regulatory approval.

The AT&T and DirecTV deal is seen as a counter to the Comcast and Time Warner deal.

Comcast is headquartered in Philadelphia, Pennsylvania and in January of 2011, acquired a 51% majority stake in media conglomerate NBCUniversal from GE. Comcast also has significant holding in several cable networks (including E! Entertainment Television, the Gold Channel, and NBCSN), a distribution business (ThePlatform), and other related businesses.

Tim Warner Cable is headquartered in the Time Warner Center in Midtown Manhattan in New York City. Formerly known as Warner Cable Communications, is an American cable telecommunications company that operates in 29 states and has 31 operating divisions. It is the second largest cable company in the U.S. behind only Comcast.

This deal could yet be upended, as a Comcast and Time Warner merger would face tough scrutiny from the Federal Communications Commission, said an analyst from MoffettNathanson LLC. The merged company would account for almost three-quarters of the cable industry, according to the National Cable Television Association.

The merger would also face review from the Department of Justice for anti-trust issues.

The combination with DirecTV, the No.1 U.S. satellite TV provider with 20 million customers, would beef up Dallas-based AT&T's packages of cellular, broadband, TV and fixed-line phone services. For DirecTV, the deal will enable it to offer broadband Internet for the first time to its U.S. customers, filling in a gap that had made the company vulnerable to cable rivals, which can provide Internet service through their networks.

During a conference call, AT&T CEO Randall Stephenson said, "It gives us the parts to fulfill a vision we have had for a couple of years, that is, the opportunity and the ability to take premium content and deliver premium content over multiple points for the customer, whether it be through a smartphone, through a tablet, or television or laptop."

According to a report in Reuters, Stephenson's counterpart at DirecTV, Mike White, will stay on to run the satellite television business, which will continue to be based outside Los Angeles in El Segundo, California. AT&T currently offers a video service known as U-Verse and Stephenson said during a conference call the company would continue to offer it after the acquisition is completed. It expects the deal to close in about a year.

DirecTV, founded in 1994, has changed hands before. It had been previously owned by Hughes Electronics, which was part of General Electric, Rupert Murdoch's News Corp, and its most recent owner Liberty Media, which sold its stake in 2009.

The deal, which comes after a 25 percent gain in DirecTV's stock price this year that was fueled by takeover speculation, represents a potential win for Warren Buffett's Berkshire Hathaway, the satellite provider's top shareholder.

AT&T will not have to pay a penalty if regulators veto the deal.

Sources:

New York Times - AT&T to Buy DirecTV for $48.5 Billion in Move to Expand Clout

Reuters - AT&T makes bet on video with $48.5 billion DirecTV bid

Allvoices.com - Comcast agrees to acquire Time Warner Cable Deal for $45.2 billion in 'all stock deal'

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