AT&T Predicts Company Savings if DirecTV Merger Goes Through4 Jun, 2014 By: Chris Tribbey
AT&T’s proposed near-$50 billion acquisition of DirecTV could pay off within three years, according to a new filing with the Securities & Exchange Commission.
Three years after closing, AT&T will have made its money back and then some, predicting $1.6 billion in savings. “It is anticipated that at least 40% of these total synergies will be realized by year two after closing,” the filing reads. “These synergies are conservative and derived from items such as programming cost reductions, operational efficiencies and reductions in redundant broadcast infrastructure."
Programming cost reductions are the largest part of the cost savings figured into the combined company. “With the scale this transaction provides, we estimate AT&T’s U-verse content costs after the completion of the transaction will be reduced by approximately 20% or more as compared with our forecasted standalone content costs,” the filing reads.
Bundling is the next huge opportunity. AT&T noted that DirecTV offers service to 115 million households, but doesn’t have an integrated broadband service to bundle with its video product. The combined company could offer pay TV, broadband and mobile service bundled together to at least 70 million locations, and a pay-TV and wireless service bundle to approximately another 45 million U.S. locations.
“The economics of this transaction will allow the combined company to upgrade 2 million additional locations to high speed broadband with gigapower FTTP (fiber to the premise) and expand our high-speed broadband footprint to an additional 13 million locations where AT&T will be able to offer a pay-TV and high-speed broadband bundle,” the filing reads.
Delivering video content to multiple screens, cross-selling and advertising are other areas where AT&T believes it can save.
“Also, AT&T will be able to use its 2,000-plus company owned stores and the approximate 10,000 retail locations of the combined companies’ authorized agents to sell these new bundled services. Currently, about 50% of AT&T retail stores do not sell a pay-TV product,” the filing reads.