The Wall Street Journal reports that AT&T has already approached DirecTV about a merger — presumably because the satellite company’s dish receiver would look really cool on the Death Star.
DirecTV is currently the second-largest pay-TV operator after Comcast, with around 20 million customers. However, it does not offer the same sort of Internet services that Comcast and other cable providers do.
Meanwhile, AT&T only has around 5.7 million pay-TV customers. However, its wireless business is second only to Verizon’s and it claims to be expanding its high-speed Internet offerings to new markets (though most of us consider those plans just a bunch of empty promises until AT&T actually begins to deliver).
A combined AT&T and DirecTV would have a sizable customer base — approaching that of what Comcast and TWC expect to see post-merger — that could actually grow significantly larger because satellite service does not require the same infrastructure investments required of terrestrial cable.
A deal between these two companies might actually have an easier time making it through the regulatory sniff test, as it could arguably make the pay-TV market more competitive by eventually allowing DirecTV to offer Internet service that competes with cable ISPs. It could also give AT&T the ability to move into new regions, offering consumers a competitive option to the cable companies that currently have local monopolies in most markets.
While both DirecTV and Dish have large customer bases, the fact that most satellite customers also need to buy their Internet service through a local cable or telephone provider has been a problem for these two companies as more consumers look online for their entertainment needs.
A DirecTV/AT&T tie-up would likely face opposition from Dish, as such a merger would give DirecTV a distinct advantage over Dish. It would also push Dish toward a marriage of its own with a cable or telecom operator. Both T-Mobile and Sprint have reportedly checked out Dish’s OKcupid profile and considered asking the satellite provider out on a coffee date.
And then there is that always-possible mash-up of DirecTV and Dish. The two companies tried to get together back in 2002, when Dish was still under the EchoStar umbrella. The deal collapsed when it became clear that regulators would not approve it. DirecTV CEO Mike White reportedly still believes the folks in D.C. would not sign on off on a marriage of the only two national satellite providers; and he’s probably right.