If AT&T buys DirectTV, it could go head-to-head with Comcast-Time Warner Cable


(mrbill)

AT&T may be getting more involved in the pay-TV business with a bid for DirecTV, according to a report by the Wall Street Journal. If that's true, it could have major implications for the U.S. TV market.

Merging with one of the nation's biggest satellite TV providers would put Ma Bell on strong footing to compete against an expanded Comcast (if the cable company successfully buys Time Warner Cable). AT&T has about 5.7 million TV customers on its U-verse service, while DirecTV boasts about 20 million subscribers. A combined Comcast-Time Warner Cable would control about 30 million customers. The mergers would create two big giants, each controlling around one-third of the U.S. pay-TV market.

One big question is whether AT&T could get a merger past federal regulators, who are already looking closely at the proposed Comcast deal. A serious move by AT&T to pursue DirecTV (more on that in a bit) would trigger a pretty complicated game of regulatory chess: The Federal Communications Commission and the Justice Department would probably need to determine whether or how an AT&T-DirecTV merger would affect a Comcast-TWC merger.

But perhaps it won't get to that point. In a research note, analysts at Moffett Nathanson say it's unlikely that AT&T is serious about going after DirecTV. The only way AT&T could make real money off the deal would be if it bought the profitable DirecTV just to bolster its revenues rather than merging it in a significant way with its other services.

"Perhaps that’s enough," the analysts wrote in a research note. "But it isn’t strategy; if simply buying cash flows is sufficient, AT&T could just as easily buy a pharmaceutical firm. Or a dog racing track."

Still, it's a fascinating rumor that hints at an eventual convergence of companies that historically functioned in separate industries.

Brian Fung covers technology for The Washington Post.
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