DirecTV Deal Seen Signaling Renewed AT&T Focus on Domestic Business
AT&T’s proposed deal to buy DirecTV may be a signal the telco is prioritizing its domestic business over expanding its international presence, industry analysts told us Monday. AT&T is selling off its remaining stake in Latin American wireless carrier América Móvil for $6 billion to ease some of the regulatory hurdles for the DirecTV deal. The DirecTV deal (see separate reports in this issue), announced Sunday (CD Bulletin May 19), essentially puts to rest speculation about AT&T’s true level of interest in Vodafone, analysts said.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
AT&T “has decided to defend the homeland” through the DirecTV deal, which is “a direct response” to Comcast’s deal to buy Time Warner Cable, said Guggenheim Partners analyst Paul Gallant. “It does show how impactful other companies think the Comcast deal really is.” AT&T said it’s selling its 8.4 percent ownership in América Móvil “to facilitate the regulatory approval process” in Latin America, where América Móvil and DirecTV are the top two pay-TV providers. The two had a combined 41 percent of all pay-TV subscribers in Latin American markets at the end of 2013, said Synergy Research Group.
The Latin American regulatory issues involved in AT&T/DirecTV are “easier to solve than they are in the U.S.,” said MoffettNathanson analyst Craig Moffett. “Selling off América Móvil is a quick and easy way of cleaning up what would otherwise be an untenable competitive conflict.” AT&T had already been selling off portions of its América Móvil stake, getting $320 million from such sales in Q1 and $1.2 billion in 2013, so “it was clear they no longer viewed it as a strategic asset,” Moffett said. “DirecTV’s Latin America business is more attractive in that it is a consolidated asset that investors are more likely to give AT&T credit for."
Industry observers believed last week that AT&T’s interest in buying Vodafone was waning, but AT&T/DirecTV removed Vodafone from the equation completely, analysts said. Possible buyouts of DirecTV and Vodafone were an “either/or proposition” for AT&T, Moffett said. “It’s hard to imagine that they'd go back to a transaction the size of Vodafone now, so for all intents and purposes I think you have to assume that’s now off the table.” AT&T had said in late January that it “does not intend” to bid for Vodafone in the immediate future, legally precluding it from making an offer for the following six months (CD Jan 28 p12). The DirecTV deal “probably complicates a Vodafone deal financially in terms of potentially stretching management fairly thin,” Gallant said.
It’s unclear whether AT&T’s perceived return to a domestic focus “is a function of strategic intent or simply a limited range of opportunities,” Moffett said. The DirecTV transaction “has the flavor of strategy by process of elimination,” he said. “It seems like they are deciding what to buy based on what regulators will allow rather than what are the assets that they want to own.” Regulators blocked AT&T’s attempt at buying T-Mobile, while AT&T “got cold feet” about Vodafone, Moffett said. “The strategic logic of DirecTV is pretty thin and you have to squint pretty hard to figure out why they did it.”