Acquisition on DirecTV by AT&T
Phillip C. Warren, Jr.
Professor Daniel Goldsmith
BUS 508 – Contemporary Business
February 17, 2015

AT&T to Acquire DirecTV On May 18, 2014 Dallas, Texas based AT&T announced it had entered into a definite agreement where AT&T would acquire El Segundo, California based DirecTV in stock-and-cash transaction exceeding $67 billion. This agreement had been approved by both Board of Directors (AT&T, 2014). AT&T has a market value of approximately $185 billion (Informitv Mutliscreen Index, 2014) and is the second largest leader in the US communications by providing wireless, Wi-Fi, high speed internet, voice and cloud-based services (AT&T, 2014). DirecTV is a satellite service company, the second largest pay-television operator in the country and valued at $40 billion (Informitv Mutliscreen Index, 2014).
Why was DirecTV Acquired by AT&T DirecTV has over 20 million television subscribers, an increase of over 4 million over eight years (Linderberger, 2014). But DirecTV does not provide broadband connections of their own. DirecTV must partner with other provides to provide there service to their customers (Cox, 2015). This puts DirecTV at a disadvantage against cable and telecomm networks to offer video on demand. This opportunity would allowed DirecTV to have the capability of providing broadband service to its customer and continue to attract new customers. AT&T is ranked number five in the US for television subscribers using its U-verse IPTV service which has taken market share from cable companies with over 16 million broadband customers (Informitv Mutliscreen Index, 2014). But U-verse expansion is predicted to peak in 2014. Acquisition of a satellite operator would help U-verse gain a national footprint. While both of the previously mentioned points are good reasons why these two companies should consider combining force, the big elephant in the room is its competitor. Comcast the number one cable company in the US has announced it intends to acquire with Time Warner Cable (Informitv Mutliscreen Index, 2014). This consolidated company would have of 30 million television customers and it would be hard for AT&T or DirecTV to be competitive to such a giant. The AT&T and DirecTV acquisition would result in approximately 26 million customers (Informitv Mutliscreen Index, 2014).
Significant Positive or Negative Effects of the Merger One of the reasons the acquisition makes sense is the infrastructure that it will provide to DirecTV by providing a stable platform to deliver its content to customers. But there are large gains for AT&T as well. AT&T gets to stream DirecTV’s content on its tens of millions of mobile devices owned by AT&T wireless network customers (Linderberger, 2014). One of the prizes of have DirecTV as a partner is its converted contract with the NFL for its NFL Sunday Ticket package. This allows subscribers to view any or all of a day’s out-of-town pro football games (Linderberger, 2014). This gives AT&T a competitive advantage over its competitors. This is also a deal that AT&T could not have done on its own because its –verse service was simply too small and not national. Another positive note from this merger would be AT&T’s pledge to expand high speed broadband internet service to an additional 15 million customers in rural areas that do not have the service today (AT&T, 2014). AT&T has stated it would provide this expanded service within four years of closing the acquisition deal with DirecTV. Customers would be able to purchase broadband services as either a bundle package along with other AT&T services or as a standalone package (AT&T, 2014). These two positive impacts allow AT&T and DirecTV to become bigger and be more competitive against its rivals, increase customer size, and increase and improve broadband connections nationwide. But there are negative impacts as well. This deal would definitely position the new AT&T in a better position to compete against Comcast, but it would prevent anyone else from competing against the two. With the Comcast/Time Warner deal, Comcast would have approximately 30 million television viewers. The new AT&T would have approximately 26 million. That would give these two company approximately 56 million viewers out of around 115 million television homes in the US, that is almost have of the market with Comcast, AT&T, and Verizon (Informitv Mutliscreen Index, 2014). This would require AT&T current main competitor Verizon and DirecTV current rival Dish Network to merger in order to remain competitive. With over 14 million subscribers for Dish Network and over 5 million for Verizon FiOS, combined to have 19 million television viewers, there would create a trilopy in the market (Informitv Mutliscreen Index, 2014). And with lack of competition there would be little need to competitive pricing in cable or internet service to consumers. As customers cost, for both cable and internet, have only gone up, America is 26th in the world for broadband download speeds and 44th in upload speeds (Kushnick, 2015). There is no serious wired or wireless competition to lower prices or receive better service. Cable TV prices have increased over 300% in over just 20 years. Kushnick states his triple play package, which includes cable, phone and internet was advertised at $89.99 two years ago but now the price is $190 (Kushnick, 2015). This environment creates a culture of colluding and conducting non-competitive deals with their communication brethren which results in bad service and higher prices for consumers (Kushnick, 2015).
Organizational Structure The acquisition of DirecTV by AT&T is not expected to close until April or May of this year. But the senior level leadership of DirecTV is as follows:
The Board of Directors for DirecTV consists of 11 people with the CEO of the company also serving as Chairman of the Board. The following senior executives report to the CEO: Chief Financial Officer (CFO), Human Resources, Programming and Content, Chief Technology Officer (CTO), Legal and Secretary, Operations, and Latin America. The following executives report to the CFO: Tax Reporting and Tax Planning, Treasurer, and Control and Accounting. The following executives reports to the Human Resource Director: Marketing Recruiting and Operations, Talent Management, and Talent Acquisition and the Chief Information executive reports to the CTO (The Official Board). The senior level leadership at AT&T is as follows:
The Board of Directors consists of 15 people. The CEO is a member of the board but does not function as the Chairman of the board. The following executive report to the CEO: CFO, Business Solutions, Mobile and Business Solutions, President and Strategy, Global Business Solutions, Home Solutions, Technology and Operations, Operations, External and Legislative Affairs, Legal, Marketing, Human Resources, and Georgia and South Carolina. The following senior executive report to the CFO: Financial Planning, Finance, Finance Services. The Mobility executive reports to the Mobile and Business Solutions executive. Government solutions executive reports to the Global Business Solutions Executive. The following executives report to the Technology and Operations Director: CTO and AT&T Labs, Technology Development, Senior Vice President, and Architecture and Design. The Marketing Communications executive reports to the Marketing Director and the Talent and Diversity executive reports to the Human Resources Director (The Official Board).

Human Resource Management Jeff Kagan, an industry analyst, does not expect layoffs, not at lease from DirecTV (Sandronsky, 2014). Kagan believes that AT&T and DirecTV are two different companies that provide separate services that complement each other well. The Communications Workers of American, AFL-CIO releases a statement saying, “We also believe that it will provide better employment opportunities for tens of thousands of employees at both companies.” (Sandronsky, 2014, p. 2) An open letter was also submitted to syracuse.com from Ann Marie Talierco, President of Central New York Area Labor Federation and Unite Here Local 150, AFL, CIO, says that this will allow an additional has 8,000 to 10,000 men and women a chance to join the union and receive good paychecks and decent benefits (if they choose) (Sandronsky, 2014). So as we wait to see what happens at the new AT&T I believe it was best said by Craig Aaron who heads a non-partisan group, “But I have yet to see a merger that created more jobs.”, and further stated, “Big companies merge to cut suddenly “redundant” positions” (Sandronsky, 2014, p. 2).

References
AT&T. (2014, May 18). AT&T to Acquire DirecTV. Retrieved from About AT&T: http:/about.att.com/story/att_to _acquire_diretv.html
Cox, K. (2015, September 5). Why Ins't America Freaking Out About AT&T/DirecTV Merger-And Should We Be? Retrieved from Consumerist: http:/consumerist.com/2014/09/05/whu_inst-america-freaking-out-about-attdirectv-merger-and-should-we-be/
Informitv Mutliscreen Index. (2014, May 4). Informinf internet television and video: Implications of AT&T acquiring DirecTV. Retrieved from Informitv.com: http://informitv.com/2014/05/04/implications-of-att-aquiring-directv
Kushnick, B. (2015, January 7). 2015: The Trend Line for Comm8unications Services--Phone, Broadband, Internet, Ca ble TV & Wireless--Sucks. Retrieved from Huffington Post: https:/www.huffingtonpost.com/bruce-kushnick/2105-the-trend-line-or-c_b_6433574.html
Linderberger, M. (2014, October 8). Here's the roadmap for AT&T's proposed merger with DirecTV. The Dallas Morning News , p. technology.
Sandronsky, S. (2014). Labor and the AT&T-DireTV Merger. Retrieved February 17, 2015, from The Progressive Populist: http://www.poplulist.com/20.12.sandronsky.html
The Official Board. (n.d.). AT&T. Retrieved February 17, 2014, from The Official Board: https://www.theofficicalboard.com/org-chart/att
The Official Board. (n.d.). DiercTV. Retrieved February 17, 2015, from The Official Board: https://www.theofficialboard.com/org-chart/directv