AT&T wants to buy its way back into show biz with DirecTV

Recently announced rumors have it that AT&T is deep in talks to buy satellite TV provider DirecTV for something like $50 billion. But AT&T isn’t afraid to spend billions for things they really want.

According to a report from Reuters “The second-largest wireless operator is discussing an offer in the low- to mid-$90s per share for DirecTV, compared with the company's closing price of $87.16 on Monday.” Reuters gained their information from two people who preferred to remain nameless since the talks are still ongoing.

“A bid near $95 per share would value DirecTV at more than $48 billion based on its shares outstanding, and would represent a premium of more than 20 percent to its stock price before news of AT&T's interest first emerged on May 1.”

Related: RFD-TV inks new deal with AT&T

Obviously the deal has yet to be finalized and the terms could still change (for example there is still the question about what role DirecTV Chief Executive Officer Mike White would assume).

This is the second time that AT&T tried to buy their way into the television business. Back in 1999 they bought MediaOne for $62 billion and then later bought Comcast for $72 billion. After AT&T sank even more billions into Comcast’s aging infrastructure Comcast turned around and bought themselves back for $44.5 billion.

Somebody at AT&T wasn’t thinking clearly about all this and this new deal to purchase DirecTV sounds suspiciously similar.

Critics of the MediaOne and Comcast deals fourteen years ago mentioned that AT&T didn’t know what they were getting into and by throwing money around like candy they actually drove the market price up for each of their questionable acquisitions.

Related: AT&T’s bid for DirecTV puzzles a lot of us

Prior to AT&T’s cable shopping spree cable companies were valued based on the number of subscribers they had. In the 90’s an average value per subscriber was around $35. When AT&T came along the value per subscriber jumped to near $150 per subscriber. The cable companies were practically lining up at AT&T’s door begging to be bought.

Then it turned out that in many cases the cable lines were so old and the equipment so outdated that it couldn’t support broadband services. AT&T had to invest million upon millions to shore up those old systems in order to even promise broadband. Even then they rolled out broadband services in a disorderly fashion, forcing the company to send truck after truck out to people’s homes, and that cost them an additional $200 to $800 per subscriber. They were digging themselves in so deep that in some cases it was going to take almost 10 years per subscriber before they would see any real profits.

That’s when they decided to get out of the cable business and get back into the telephone business. They did manage to transition their landline business into a mostly wireless business, which was a good thing.

Maybe they see this DirecTV deal as a way to get back into show business without all those troublesome wires.

Guy Wright

Guy Wright has been covering the technology space since the days when computers had cranks and networks were steam powered. He has been a writer and editor for more years then he cares to admit. He has lost count of the number of articles, blogs, reviews, rants and books that he has published over the years, but he hasn’t stopped learning and writing about new things.


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