AT&T Says DirecTV Deal to Cut TV Programming Costs by 20%

AT&T Inc. (T) said its acquisition of DirecTV will help reduce one of its biggest video costs -- TV content -- by about 20 percent.

In a regulatory filing today laying out further details on the benefits of its $48.5 billion takeover of DirecTV, AT&T said that about 60 percent of its video subscriber revenue goes to paying for content for its U-verse TV service. Programming expense reductions will be the most significant part of the combined company’s goal for cost savings to top $1.6 billion on an annual basis three years after the deal closes.

AT&T is gaining more than 38 million video subscribers at home and in Latin America with the purchase of satellite-TV provider DirecTV. AT&T Chief Executive Officer Randall Stephenson is bulking up after competitors Comcast Corp. and Time Warner Cable Inc. announced their own merger. For both AT&T and Comcast, getting bigger means greater negotiating power with video providers, from traditional cable networks to online streaming services.

At least 40 percent of annual cost savings will be reached within two years of the deal closing, AT&T said today. While revenue synergies aren’t factored into the forecast, AT&T said there are opportunities to boost sales by packaging more services together, selling more advertising and offering video content on multiple screens.

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net John Lear

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