The second largest U.S. wireless provider AT&T (NYSE:T) is trying to defend its combination proposal with satellite provider DirecTV (DTV) to the lawmakers. The Dallas based carrier is not the only one pleading for approval, satellite TV industry player Comcast (NASDAQ:CMCSA) is also looking for regulators’ consent on its $45 billion deal to acquire Time Warner Cable (NYSE:TWC). Mergers in the wireless space have attracted several headlines in the recent past.
On Wednesday, AT&T and Comcast stood before the public interest committee, a trade group, and satellite TV provider Dish at the Senate hearing. The hearing took place as the industry regulators are preparing to review two blockbuster deals in the wireless industry – first, AT&T and DirecTV, and second, Comcast and Time Warner.
- Warning! GuruFocus has detected 6 Warning Signs with T. Click here to check it out.
- T 15-Year Financial Data
- The intrinsic value of T
- Peter Lynch Chart of T
Making a Case Before the Lawmakers
It’s high time for AT&T to explain to the regulators how important the deal is for the company, along with stressing on the fact that it’s beneficial for the American economy. The two companies together would offer video across the nation, and improve the broadband coverage to more than 70 million people. They emphasized that the merger would lead to greater meaningful investments, promote innovation, and solidify competition.
For AT&T, it’s a big step and the merger would strengthen another solid source of revenue. As the wireless mobile market is getting saturated, enhancing bundle services, providing value adds and competitive products is becoming essential for top and bottom lines growth.
In the Wednesday hearing, both AT&T and Comcast made a case to the regulators, stating how indispensable it has become to make such strategic moves with the changing online video streaming environment. Executives from AT&T and Comcast argued that there’s no hidden intention behind their respectively acquisition proposals. It is rather meant to effectively compete in the video space. Comcast EVP David Cohen tried to mellow down regulators’ fear regarding killing competition in the market, saying that that Comcast does not share any market with Time Warner. So the combination would not lead to threatening other market players.
On the other hand, AT&T has been long looking to compete with other cable operators, but since this business isn’t core to the telecom provider business, it’s not able to give tough competition in this space. It aims to do so by joining forces with DirecTV by purchasing it for $49 billion. Senior EVP of AT&T John Stankey believes that the deal would enhance the company’s skill in offering fresh video models to their subscribers. The combined entity would also be able to serve the rural population better, as promised by AT&T when it said that it plans to expand its reach in rural and underserved regions to provide internet service.
Is Dish Using “Scare Tactic”
Dish Network blatantly opposed Comcast’s deal to buy Time Warner, and said that the regulators should reject the deal on the face of it. Dish isn’t happy to see the combined company having control over half the American residential Internet broadband services. This could prevent small streaming companies. Dish made a comment warning about the two merger deals saying that incase the deals are given a green signal, it would decide how “a few large companies control what Americans watch and how they do so.”
To this Comcast’s Cohen responded that Dish was using a “scare tactic” to prevent the merger from happening. The regulators are already skeptical about the propositions, and Dish’s opposition makes the matter worse. The Federal Communication data shows that Comcast and Time Warner would have around 35% of the residential internet market share, so a 50% claim by Dish is a mere way of raising fears.
The two deals would be firmly screened by the FCC, given the amount of cynicism that is spread regarding its impact on competition and customers. Though both AT&T and Comcast have presented their cases in front of the Committee, it remains to be seen whether the regulators would consider the deal in favor of the duo.