By Thomas Gryta and Joe Flint
Two big media deals were announced in the first half of 2014.
Only one is likely to survive.
While Comcast Corp. is on the brink of dropping its $45.2
billion takeover of Time Warner Cable Inc. under pressure from
regulators, AT&T Inc.'s $49 billion acquisition of DirecTV is
moving through the pipeline.
At its core, the AT&T deal presents fewer problems for
regulators than Comcast's combination, which would create a company
that is at once a giant Internet service provider, a dominant
seller of cable television and a significant content company.
AT&T's deal, meanwhile, would join its regional pay-TV business
with DirecTV's satellite operation, which lacks a robust broadband
offering.
The divergence in fortunes signals that regulators are more
worried about providing choice in Internet access and new, online
video options than they are about concentration in pay TV.
The Federal Communications Commission sees the AT&T deal as
helping competition and aiding the spread of broadband into rural
areas that lack service, people familiar with the matter said.
The regulator hasn't sat down with AT&T to finalize the
concessions for the deal, something that needs to happen before an
order is written up and sent to the commissioners to vote,
according to people close to the situation. But the commission's
staff is inclined to recommend the approval of the deal, people
familiar with the matter said.
The Justice Department is also reviewing the deal. It has yet to
raise any significant issues, people familiar with the matter
said.
AT&T tapped the bond market Thursday to raise $17.5 billion
needed to help pay for the deal. The company also said late
Wednesday that it expects to eventually save at least $2.5 billion
a year in costs as a result of the merger, more than the $1.6
billion it forecast previously.
Traders read both moves as signals the company has grown more
confident the deal would close. Shares of DirecTV rose 3.3% to
$90.12 Thursday, hitting their highest level ever. AT&T, whose
shares climbed 4.2% to $34.23, says the deal will close by the end
of June.
To get ahead of regulators, AT&T made several commitments
when making the deal last year including expanding its high-speed
broadband to 15 million locations, mostly in rural areas,
guaranteeing prices for customers seeking only broadband
connections, and committing to certain net-neutrality policies.
Additional concessions could include assurances around how the
company deals with online video distributors, people close to the
situation said.
Convincing regulators and investors that the combination made
sense was important to AT&T. The deal is its first major
acquisition since the government squashed its 2011 $39 billion
attempt to buy wireless rival T-Mobile.
In searching for opportunities after the T-Mobile debacle,
AT&T was looking to Europe and a possible deal for Vodafone
Group PLC. The Comcast deal for Time Warner Cable reset AT&T's
plans, because it would have created a massive new broadband rival
and also provide a window for approval of a DirecTV takeover, an
idea that had long interested AT&T.
Part of AT&T's reasoning in restarting talks with DirecTV
was to get the transaction in front of authorities while they were
considering the Comcast deal, a person familiar with the matter
said.
Wall Street has warmed to the deal. Some analysts have expressed
doubts about the wisdom of owning a satellite broadcaster, a
business many feel has peaked, but think DirecTV's cash flow will
help AT&T cover its expensive dividend.
Write to Thomas Gryta at thomas.gryta@wsj.com and Joe Flint at
joe.flint@wsj.com
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