How the DIRECTV Acquisition Benefits AT&T’s Content Costs
AT&T at the Morgan Stanley European TMT Conference: Key Takeaways
AT&T’s bargaining power with content providers after DIRECTV acquisition
In this series, we will examine some of the key points that AT&T (T) discussed at the recent Morgan Stanley European TMT Conference held on November 12, 2015. We will also look at 3Q15 results of DIRECTV (DTV) US, announced on November 17, 2015. Let’s start with AT&T’s content costs after the DIRECTV acquisition. During the conference, John Stephens, the telecom company’s chief financial officer, mentioned, “we feel very good about where the content results are coming in after just about 100 days now since the merger.”
AT&T completed the DIRECTV acquisition on July 24, 2015, for a total transaction value of ~$63 billion. A large pay-TV subscriber base after the DIRECTV acquisition gives AT&T better bargaining power with content providers.
After acquiring this satellite TV provider, AT&T had the largest US pay-TV subscriber base. At the end of 3Q15, the second biggest player in this category was Comcast (CMCSA). In addition, Dish Network (DISH) had the third largest pay-TV subscriber base in the US at the end of 3Q15.
AT&T’s content deal with A+E Networks
Recently on November 23, 2015, AT&T signed a distribution agreement with A+E Networks. This agreement is for both U-verse and DIRECTV. According to AT&T, “The new agreement delivers to AT&T terms that reflect its new scale and status as the largest pay TV provider in the world.”
Instead of investing directly in AT&T, you may consider diversified exposure to the telecom company by investing in the iShares MSCI USA Minimum Volatility ETF (USMV).
The ETF had ~1.7% of its holdings in the integrated telecom company at the end of September 2015.
Browse this series on Market Realist:
