What is Next Big Deal to Be Proposed in US Market?

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Now that AT&T has formally announced its deal to buy DirecTV; Dish Network, Sprint, T-Mobile US and Verizon are the remaining leading U.S. providers in various parts of the emerging triple-play market not already committed to a major acquisition effort.

Comcast’s move to buy Time Warner Cable and AT&T’s bid to acquire DirecTV will likely force other providers to assess how they can bulk up as well.

Some question the value or wisdom of AT&T’s proposed purchase of DirecTV, though few have similar qualms about Comcast’s acquisition of Time Warner Cable. The main argument seems to be that the former transaction does not yield as many strategic advantages as does Comcast’s purchase of Time Warner Cable.

To be sure, AT&T’s acquisition of DirecTV is criticized as buying into a platform of limited value for the emerging triple play business and a service (linear video entertainment) that is in danger of being supplanted by over the top delivery.

In fact, that shift to over the top delivery is at the top of agendas for Verizon, Dish Network and Comcast, in various ways.

Those criticisms have merit but periods of industry consolidation sometimes are driven by strategic motives of several types.

Sometimes the issue really is gaining strategic products. That was the case for high speed access, mobile services and video entertainment.

That is a “broaden our scope of products” motivation.

At other times, even big moves are driven by scale concerns. Comcast’s move is more that sort of move, and AT&T’s bid to buy DirecTV also is related to customer mass and scale. At a time when all the major providers are getting bigger, grabbing more customers (scale) is reason enough to make big acquisitions.

AT&T might have preferred to gain more scale in mobile, but antitrust authorities closed that approach. Likewise, regulatory officials undoubtedly would frown on any AT&T expansion of its fixed network share, even if AT&T wished to do so.

In that sense, the DirecTV deal is not as valuable as AT&T might have preferred, but its other methods of expansion in the core U.S. market are not available.

Verizon might earlier have been considered a bidder for Dish Network, but does not at the moment seem to want to pursue that sort of deal. Dish Network, on the other hand, has to find a partner, near term, to help it deploy its planned Long Term Evolution network.

Sprint and T-Mobile US, meanwhile, are in a situation akin to that of the satellite providers. They are single-purpose networks in a market making a rapid transition to triple-play services based on ownership of both fixed and mobile assets—so additional deals are coming.




Edited by Maurice Nagle
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