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AT&T and DirecTV Look To Acquire This Sports Network

August 11, 2014 | About:
Quick Pen

Quick Pen

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The second-largest U.S. telecom provider AT&T’s (T) $48.5 billion deal to acquire DirecTV (DTV) is going to take a long time before it can close. However, this isn’t deterring the two from putting joint efforts and partnering to find other lucrative purchases or deals that might help them strengthen bundled services in the future. The two are considering to acquire CSN Houston, which is a regional sports network currently supported by Comcast Corp (CMCSA).

The history
CSN Houston was launched in 2012. The sports network is co-owned by Major League Baseball’s Houston Astros, National Basketball Association’s Houston Rockets and Comcast’s NBC Universal. Astros owns about 46% stake in the network, Rockets has around 31% stake and Comcast has 22% of the network. The network’s profitable stay became short-lived as it failed to make its base and widen its distribution. With such a small area of distribution, with neither DirecTV nor AT&T's U-Verse striking deals because of its high price, very soon in the past year, CSN Houston filed for bankruptcy.

One of the individuals close to the matter said on condition of anonymity that a court filing may be released soon disclosing AT&T’s interest to bid for the total network. The wireless provider and the satellite broadcaster have proposed a plan to the U.S. Bankruptcy Court judge at Houston expressing their desire to take charge of the troubled sports channel which holds the right to broadcasts involving the Astros and Rockets.

In details
The consideration to purchase CSN Houston sounds meaningful as the Dallas-based carrier plans to acquire pay-TV player DirecTV. AT&T could co-own CSN’s network along with DirecTV, which already owns as many as four regional sports network jointly called Root Sports Houston. If AT&T’s proposal to buy the network receives a green signal, it would get 40% ownership stake in the network while the remaining 60% would go to DirecTV.

So what is the price for which AT&T would get the sports network? This hasn’t been decided yet, and it could widely range from $100 million to $800 million – all of which depends on comparable transactions. If AT&T can strike the deal, it could prove quite beneficial. Both AT&T U-Verse and DirecTV serve customers in the Houston area, and expanding its offerings by adding another sports network would solidify its position further.

In the past seasons, neither has provided Rockets and Astros games as they could not come to amicable contractual terms with the network. Another reason why U-Verse or DirecTV did not show Astros is because of its poor performance in the recent past. This has pulled down its valuation considerably because of which the pay-TV providers hesitated in carrying the network. DirecTV’s executive vice president of programming Dan York, however, expressed its interest saying:

“I certainly would like to bring the Rockets and Astros back to DirecTV, but it has to be at a price that is fair for all of our customers, whether they are fans of the teams or not.”

But AT&T and Comcast spokespersons declined to make any comment on this matter.

Departing Thoughts
AT&T has been actively working to strengthen its satellite business base to develop another strong line of offering other than mobile broadband where it’s facing fierce competition from existing rivals. Its strategy to acquire DirecTV and sport’s network CSN Houston should make its satellite base much stronger. But it remains to be seen whether the two deals win a go-ahead signal from the regulators who are often skeptic about approving mergers and acquisitions.

About the author:

Quick Pen
A seasonal writer with a Management Degree in Finance and interests in automotive, technology, telecommunication and aerospace sectors.

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