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AT&T Ups Interest in DirecTV

6 May, 2014 By: Erik Gruenwedel

No. 1 satellite operator Q1 subscriber gains slow

AT&T reportedly has upped interest in acquiring DirecTV, which is also fielding merger scuttlebutt from No. 2 satellite operator Dish Network.

Similar to the ongoing merger between cable giants Comcast and Time Warner Cable, satellite and telecom operators are seeking to consolidate as a means of gaining leverage with content holders — the latter’s increasing retransmission fees a principal driver of the mergers.

In addition to securing larger numbers of bundled pay-TV channel subscribers, multichannel video program distributors are looking to consolidate their broadband offerings as more consumers look to over-the-top video for their entertainment.

According to media reports, the talks are at the preliminary stage with no timeline or certainty a deal would even be reached.

Regardless, Comcast and Verizon’s recent interconnection fee settlements with Netflix underscore the clout major ISPs wield in a digital market where video streams must navigate distribution channels controlled by third parties.

"If you think the cable business is all about video, you've got it wrong," Gerald Faulhaber, an economics and public policy professor at the Wharton School of the University of Pennsylvania, told the Los Angeles Times. "Now cable is all about providing broadband Internet to homes and businesses."

With consolidation comes concern that the consumer will have fewer choices and higher bills.

"The continued centralization of control over our nation's media and communications industries is nothing more than a recipe for disaster," said Derek Turner, research director of Freepress.net

Meanwhile, DirecTV May 6 reported 12,000 first-quarter (ended March 31) net subscriber additions, compared with 21,000 net sub additions during the previous-year period. The El Segundo, Calif.-based No. 1 satellite TV operator ended the period with 20.2 million video subscribers, up 160,000 subs from a year ago.

DirecTV attributed the lower number of new subs to a higher number of subscriber disconnections associated with the larger sub base. Gross sub additions of 891,000 and the average monthly churn rate of 1.45% were relatively unchanged from the prior quarter.

The U.S. unit’s operating profit increased 11% to $1.2 billion on a 5% increase in revenue to $6 billion.


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