AT&T in Talks With DirecTV on Possible Purchase

AT&T Inc. (T), the second-biggest U.S. mobile-phone carrier, is in talks to buy satellite-television company DirecTV (DTV), people with knowledge of the situation said.

DirecTV is working with Goldman Sachs (GS) Group Inc. as it explores a sale, one of the people said, asking not to be identified discussing private information. DirecTV has a market value of $45 billion after its shares rose 43 percent in the past year.

Comcast Corp.’s (CMCSA) plan to acquire Time Warner Cable (TWC) Inc. -- to create an even bigger provider of both TV and Internet in the U.S. -- is accelerating the drive for consolidation in the rest of the industry. Meanwhile, the pool of pay-TV customers is peaking as viewers increasingly watch video online, making fast broadband connections a key offering.

Representatives for the companies declined to comment, as did a spokesman for Goldman Sachs. The Wall Street Journal reported last week that Dallas-based AT&T had approached DirecTV about a potential acquisition, and yesterday that Goldman Sachs is working with DirecTV as the companies hold talks.

Separately, Bloomberg News reported in March that Dish Network (DISH) Corp. Chairman Charlie Ergen has contacted El Segundo, California-based DirecTV to discuss a merger of the two satellite-TV companies.

Photographer: Patrick T. Fallon/Bloomberg

A DirecTV technician installs a new satellite TV dish for a tenant at an apartment building in Lynwood. DirecTV has a market value of $45 billion after its shares rose 43 percent in the past year. Close

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Photographer: Patrick T. Fallon/Bloomberg

A DirecTV technician installs a new satellite TV dish for a tenant at an apartment building in Lynwood. DirecTV has a market value of $45 billion after its shares rose 43 percent in the past year.

Best Chance

AT&T’s interest in a bid for DirecTV raises questions about which combination makes the most sense and stands the best chance of getting past regulators. DirecTV and Dish may need a deal more than AT&T does, because of their dependence on their satellite-TV operations.

Regulators’ approval may be difficult to obtain. A merger of DirecTV and Dish was blocked more than a decade ago. Any of the potential combinations may draw regulatory scrutiny because AT&T, DirecTV and Dish compete for video subscribers in parts of the country, so a deal would remove an option for customers in those areas.

Speculation about an AT&T-DirecTV combination is not new. AT&T Chief Executive Officer Randall Stephenson told the Financial Times in 2010 there would be an “industrial logic” in his company acquiring DirecTV, even though he suspected regulators wouldn’t allow the transaction.

The talks with DirecTV come as AT&T is restricted from making an approach to buy Vodafone Group Plc (VOD), Europe’s largest mobile carrier, by U.K. takeover regulations. The American company ruled itself out of making a bid for Vodafone for six months from January after British regulators asked it to clarify its intentions, although Stephenson remains interested in a potential combination, people familiar with the matter said at the time.

Shares of Vodafone, which has a market value of $102 billion, fell 1.5 percent on May 1 after the initial report about a possible AT&T bid for DirecTV as investors bet such a deal would lower the chances of a takeover.

To contact the reporters on this story: Matthew Campbell in London at mcampbell39@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net Mohammed Hadi

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