AT&T Will Retain U-verse TV, Won’t Force Customers to Switch to DirecTV

CFO John Stephens defends $67 billion deal for satcaster as offering synergies and opportunity 'to redefine the industry'

DirecTV AT&T

AT&T will not force U-verse TV customers to take DirecTV service, if the telco’s $67 billion deal for the satcaster goes through, CFO John Stephens said.

“Customers will have their choice,” said Stephens, speaking at the J.P. Morgan Technology, Media and Telecom Conference. “They can stay on U-verse. This transaction is not based on freeing up wired capacity.”

AT&T at the end of March 2014 had 5.7 million U-verse TV subscribers, making it the fifth-biggest pay-TV provider in the U.S. “Our customers are very happy. They’re voting with their feet to stay with us,” Stephens said, noting that the telco has been adding about 200,000 TV subscribers per quarter.

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Asked why AT&T did not pursue an acquisition of Dish Network, Stephens said that would have likely presented a bigger regulatory challenge given Dish’s spectrum holdings and broadband strategy.

AT&T investors have pushed the stock down 3.3% since the DirecTV deal was announced Sunday, closing at $35.50 per share Tuesday. Stephens defended the DirecTV deal as “a rare opportunity to redefine the industry,” with new bundles across new screens. “Together… we believe we can accelerate growth and make investments and do things we wouldn’t otherwise be able to do,” he said.

AT&T’s agreement with DirecTV includes a provision that allows the telco to walk away from the deal if DirecTV does not renew the “NFL Sunday Ticket” exclusive football rights deal. For now, the ball is in DirecTV’s court to negotiate an extension with the league, Stephens said, adding that comments from NFL officials about renewing a deal with the satcaster were “encouraging.”

Down the road, he said, the combined AT&T-DirecTV will be able to offer the NFL — and other programmers — an opportunity to provide something no other company can to distribute content across TV and multiple wireless devices.

After the DirecTV deal closes, AT&T expects to achieve $1.6 billion in annual cost synergies in the third year. That will reduce programming costs, Stephens said, but also will reduce expenses in operational areas such as billing, customer service, set-top box development, strategy costs and advertising.

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On the broadband front, Stephens said the U-verse fiber-to-the-node network has runway to increase speeds. U-verse provides up to 45 megabits per second speeds now, with plans for 75 Mbps and higher.

AT&T expects to expand its advanced IP wireline network to 57 million households by the end of 2015, and with the DirecTV deal the telco has committed to expanding broadband to an additional 15 million homes. In addition, AT&T has announced plans to deploy 1-gigabit-per-second fiber networks in Dallas and up to 100 communities in the U.S.

Going forward, AT&T sees an opportunity to launch over-the-top video services given the telco’s broadband and wireless footprint. “That’s a natural,” Stephens said. “That will be a national force.”