Are AT-T and DIRECTV the same?

AT&T and DirecTV – Two Different Companies with a Complicated Connection

Both AT&T and DirecTV are companies that are in the telecommunications and television services sector in the United States of America. But they have a quite complicated relationship and the situation has become different in the past few years.

DirecTV is a satellite telecommunications company formed in 1990, which specializes in direct broadcast services for television customers in the United States. Until the year 2015, DirecTV worked as an independent organization that was listed publicly. It also expanded to one of the biggest satellite TV providers in the country because of exclusive rights to the NFL Sunday Ticket and providing high-definition programming across the nation.

AT&T has existed for a relatively longer time as compared to Verizon, with its formation occurring in the last quarter of the 19th century. Originally and mostly still functioning as a telecommunications company on a national level, AT&T has provided telephone and later even mobile phone services to tens of millions of consumers for many years. The company has a rich history of development and has been through many changes such as the divestiture of the Bell system in 1984 which split local from long-distance services.

This paper seeks to discuss a specific merger, that of AT&T and DirecTV. In 2014, AT&T had expressed its desire to acquire DirecTV with the deal valued at around $67 billion. When the then giant AT&T made the huge deal, it argued that the TV services, and the spread of DirecTV would enable it to combine with its own wireless network to offer consumers differentiated packages. Moreover, the acquisition of DirecTV would provide AT&T with the necessary heft to confront the cable players in home television.

The transaction was completed in 2015 after passing through several regulatory procedures. Therefore, DirecTV was acquired by AT&T and became its subsidiary, while at the same time, it maintained a significant level of independence and authority. However, significant strategic planning processes and reports were returned to the AT&T leadership after the merger.

Why combine these companies that on the surface appear to be in entirely different industries? To many industry observers, the merger of a telecom giant and a satellite TV provider was not quite clear at all. Indeed, AT&T has established such a vast customer database over the years through offering mobile phone and IP broadband services. It was not a major television service provider or cable company like Comcast but it offered cable television services.

However, when the dust settles and the history of the event is viewed, one is in a position to understand the rationale of the deal. Perhaps, AT&T saw television media and wireless services as merging in the next decade or so of the year. As internet connection increases through new technologies like 5G, AT&T noted that most of the customers will be unable to differentiate mobile video from television video streaming to their homes. AT&T wanted to own DirecTV’s distribution platform and rights to premium content such as NFL games to integrate telecom and entertainment packages amidst this convergence.

Furthermore, the AT&T was able to get into the home television business at a large scale and with coverage across the country with the acquisition of DirecTV. By several years, the AT&T officials appear forward to delivering targeted advertising capacities across DirecTV to supplement its information from wireless and online services. The expected outcome is for AT&T to deliver full coverage and tailored packages for mobile, TV and Internet services across the country.

What is the current relationship between AT&T and DirecTV?

Just over 4 years after buying DirecTV, AT&T has made some actions suggesting that satellite TV is not a core business going forward. In February 2019, AT&T signed a deal of selling its stake in Hulu back to the company, which may indicate its disinterest in third-party streaming platforms and services and more concentration on its own streaming services.

Also, in 2020, there was the release of a new streaming application HBO Max, a direct-to-consumer application developed by AT&T that included content from HBO, DC Comics and others. The launch of HBO Max also corresponds with AT&T leadership openly questioning the prospects for satellite television and expressing a willingness to divest from non-strategic operations.

In February 2021, AT&T revealed that it planned to divest a minority stake in DirecTV to TPG Capital, a private equity firm. The deal included the sale of 30% stake of the new DirecTV entity to TPG. The transaction gives DirecTV a value of about $16 billion – a substantial difference from when AT&T bought the company for $67 billion in 2015. There is also the issue of DirecTV now part of AT&T, which has lost about 20% of its subscriber base since the acquisition in 2015.

Indeed, the TPG deal appears to indicate that AT&T is keen on highlighting its high-speed wireless network and streaming prospects for future development. Although it still owns the majority of stakes in DirecTV, AT&T is gradually moving away from overdependence on the declining satellite television industry. However, 5G expansion, fiber-based internet services and HBO Max are among the key projects that are considered to be more important for AT&T’s future development.

In Conclusion Despite AT&T purchasing DirecTV back in 2015 and having a majority stake in the company today, the two companies are mostly separate today. It is quite probable that AT&T was able to envision how DirecTV could add value to its wireless offering or serve as a national TV provider five years ago. However, the decrease in satellite TV customers coupled with the increase in streaming has forced them to rethink the position of DirecTV.

For this reason, despite AT&T retaining a majority stake in the firm, DirecTV does not seem to be a central part of AT&T’s strategic vision. As 5G and fiber investments are expected to rise and HBO Max will focus more on their investment, there will be more divergence between the parent and subsidiary companies in the next few years. Although their goal was to offer a set of services that could not be matched by anyone else in the world as a single package, the future will probably see AT&T and DirecTV as two largely independent businesses due to the current ongoing changes in the industry.