Telecommunications giant AT&T announced Sunday it plans to buy satellite-television provider DirectTV for $48.5 billion. The deal will combine the 5.7 million AT&T U-Verse TV customers with DirectTV’s 20 million customers.
AT&T CEO Randall Stephenson hailed the deal as good news for the company and consumers.
"This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens," he said.
Upon completion of the merger DirectTV will operate as a subsidiary of AT&T. The company’s headquarters will remain in El Segundo, Calif.
Combining the two companies will create the second largest pay-TV provider in the country. The number one spot is held by Comcast, who purchased its rival Time Warner Cable earlier this year for $45 billion.
That trend of consolidation has many industry analysts and consumer advocates worried.
"The industry needs more competition, not more mergers," John Bergmayer, an attorney at consumer advocacy group Public Knowledge, told USA Today. "The burden is on AT&T and DirectTV to show otherwise.”
Some say that the merger of Comcast and Time Warner is justification enough for the AT&T deal to proceed. But Delara Derakhshani, a policy counsel with Consumer Reports, told Reuters that argument is problematic.
"You can't justify AT&T buying DirectTV by pointing at Comcast's grab for Time Warner, because neither one is a good deal for consumers,” she said.
"This is not Comcast-Time Warner Cable round two," said Amanda Wait, a former antitrust attorney at the Federal Trade Commission.
The difference in the two deals is that, by purchasing DirectTV, AT&T is actually eliminating a direct competitor. Comcast and Time Warner, by contrast, were not operating in the same markets and were not directly competing.
That distinction may give regulators pause. To sweeten the deal for them, though, AT&T has agreed to expand broadband service to rural areas. It will also guarantee sustained broadband speeds and adhere to so-called net neutrality rules.
Should regulators give the merger the green light, company officials expect the deal can close within a year.
Shares of DirectTV have surged 12 percent in recent weeks as rumors of the deal began to circulate.