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FCC approves AT&T, DirecTV merger 'with conditions'

With the acquisition of DirecTV, AT&T is poised to become the second-largest TV provider in the United States.
Written by Rachel King, Contributor

Summer Fridays are typically regarded as slow, but AT&T scored a major win to close out the week.

The Federal Communications Commission officially approved the telco's bid to acquire DirecTV.

AT&T first announced plans to purchase the satellite TV service provider in May for the price of $48.5 billion.

DirecTV shareholders were promised with 1.892 shares of AT&T common stock, on top of $28.50 per DirecTV share in cash.

After a failed bid for T-Mobile, AT&T had regrouped with a focus on Internet TV, bolstering its existing U-Verse platform. With the acquisition of DirecTV, AT&T is poised to become the second-largest TV provider in the United States.

AT&T CEO Randall Stephenson said a few months ago that the purchase of DirecTV provide the company with leverage to negotiate better content costs and add customers.

Nevertheless, the FCC stipulated on Friday that it is only approving the merger "with conditions."

Those conditions boil down to the following three requirements:

  • The soon-to-be single entity must expand high speed fiber Internet access to at least 12.5 million customer locations, E-rate eligible schools and libraries within the next four years.
  • AT&T must offer broadband access to low-income consumers at discounted rates. AT&T responded it will start with plans of 3Mbps service at $5 per month and 10Mbps for $10 per month.
  • AT&T cannot write its own rules on data caps and providing access to online video, circling back into the tangled web that is net neutrality.

In reflection of criticism that the merger could harm consumers, the FCC insisted these measures would "ensure that the benefits of the merger will be realized."

Stephenson responded in a statement that AT&T will now be "fundamentally different company with a diversified set of capabilities and businesses."

"This transaction allows us to significantly expand our high-speed Internet service to reach millions more households, which is a perfect complement to our coast-to-coast TV and mobile coverage," Stephenson wrote.

Looking forward, DirectTV president, chairman and CEO Mike White plans to retire.

In his stead, AT&T's chief strategy officer John Stankey will lead the combined DirecTV and AT&T Home departments under the new umbrella of AT&T Entertainment & Internet Services.

That department plans to roll out a new integrated TV, mobile and high-speed Internet platform matched by the goal of expanding AT&T's fiber broadband footprint to more than 14 million customer locations.

AT&T is also still writing off another expensive acquisition -- Nextel Mexico for $1.88 billion -- which was reflected in a mixed earnings report earlier this week, demonstrating better-than-expected earnings but light revenue.

AT&T projected that these deals, along with the $2.5 billion buy of Mexican wireless provider Iusacell, will be complete by the end of the year.

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