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May 19, 2014

AT&T aims for TV's future with $48.5B DirecTV deal

LOS ANGELES — AT&T says it views its planned $48.5 billion purchase of DirecTV as a way to help redefine the video entertainment industry, giving it opportunities to bundle services and tap into growing Latin American markets.

AT&T Inc.'s proposed transaction primes it for the age of Internet-delivered video.

AT&T and DirecTV promised consumer benefits like more economical bundles that tie mobile phone, pay TV and Internet service together on a single bill. AT&T said that it'll probably be 12 to 18 months for robust streaming video offerings to be available, but that bundled offerings should be available soon after the deal closes, which the companies expect to occur within 12 months.

AT&T is currently the second-largest wireless provider with 116 million customers.

The company will gain access to DirecTV's 20.3 million U.S. customers and its 18.1 million Latin American customers. DirecTV's U.S. customers, coupled with 5.7 million U-verse TV customers, will give the combined AT&T-DirecTV 26 million U.S. users for video. That would make it the second-largest pay TV operator behind a combined Comcast-Time Warner Cable, which would serve 30 million under a $45 billion merger proposed in February.

"What it does is it gives us the pieces to fulfill a vision we've had for a couple of years — the ability to take premium content and deliver it across multiple points: your smartphone, tablet, television or laptop," AT&T Chairman and CEO Randall Stephenson said during a conference call Sunday.

Michael White, chairman and CEO of DirecTV Inc., said Monday that his company has been talking off and on with AT&T about a potential transaction for years, but that recent trends in the industry helped make the deal happen now.

The companies are aiming to eke out $1.6 billion in annual cost savings in an increasingly expensive and maturing pay TV business. Using DirecTV's cash flow, AT&T has greater ability to invest in its landline and mobile networks for broader reach and faster speeds in an Internet service market where it risks falling behind a bulked up Comcast-Time Warner Cable.

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