AT&T and the Quadruple Play Possibility
Chase Carey, chief executive officer of DirecTV, is leaving the satellite TV provider and going back to News Corp. to take the chief operating officer reins from Peter Chernin. He will also be the deputy chairman and president of Rupert Murdoch’s company. John Malone, who bought DirecTV from Murdoch, can’t be happy about this. That said, the company is continuing to do fine in a tough economy and beating its cable industry rivals.
DirectTV added 460,000 new subscribers during the first quarter of 2009, thanks to promotions from a new AT&T partnership. And it’s in the process of being merged into the entertainment division of Liberty Media, which is then slated to be spun out into a separate, publicly traded company. Still, many are wondering what’s next for DirecTV, especially since Liberty Media CEO Greg Maffei called a sale of DirecTV to a phone company following the spin-off “possible.” UBS analyst John Hodulik makes a compelling case for that company to be AT&T:
Believe the end game is an AT&T purchase of DirecTV
Wireless penetration is nearing 90 percent and industry growth is slowing. Meanwhile, AT&T has slowed the pace of its U-verse build to 4-5M incremental homes in 2009 vs. 9M in 2008. DTV would give AT&T cost synergies and boost consumer revenue trends.
AT&T’s sales are dropping: Consumer revenues fell 6.8 percent in the first quarter while business revenues dropped 6.7 percent. Total wireline sales were down 5.4 percent. The company is riding the iPhone juggernaut, but that isn’t enough. Wireless post-paid additions are slowing down. Ergo, AT&T needs someone like DirecTV to goose up its revenues.
Wall Street has linked AT&T to digital satellite providers before. There were rumors that AT&T was almost ready to buy DirecTV competitor EchoStar. That deal never came to pass. Will this one?
