AT&T Inc. (NYSE:T) And DIRECTV (NASDAQ:DTV)’s Transaction Benefits U-Verse


The latest transaction between AT&T Inc. (NYSE:T) and DIRECTV (NASDAQ:DTV) is giving massive benefit to U-Verse. The major benefit that AT&T received from DIRECTV regards content cost. After the acquisition, it has been found that AT&T got a huge pay-TV subscriber base through this transaction.

U-Verse: The One that benefited the most?

The product that has received the most benefit in this transaction is AT&T’s U-Verse. This is forwarded in the form of cost benefits for the content. Let us look it through a kaleidoscope. AT&T’s chief financial officer, John Stephens, during a Morgan Stanley European TMT Conference, said this himself.

The content cost given by the user of U-Verse versus the cost given by DIRECTV customer has a difference of $17 a month. AT&T expects to chalk down this difference by balancing the costs of the customers of both, U-Verse and DIRECTV.

The video subscribers’ benefit

This holds importance because of huge video subscribers’ base of videos on U-Verse. By 3Q2015 ends, it is believed that AT&T shall have approximately 25.4 million video subscribers as its base. Out of this, the number of subscribers on U-Verse videos was approximately 5.9 million.

Now, as far as the domestic market is concerned, after the transaction with DIRECTV, AT&T added 26,000 video subscribers in its kitty.

An analysis of the transaction

Stephens, during the conference, has already highlighted that AT&T shall focus largely on DIRECTV in comparison to the video segment of U-Verse. This is due to the higher cost of content on DIRECTV (NASDAQ:DTV). In 3Q this year, U-Verse even suffered net losses of approximately 92,000 video subscribers, which has, to some extent, been compensated, with the addition of DIRECTV’s subscribers.

It would now only be interesting to see, as to how AT&T Inc. (NYSE:T) manages to balance the cost difference between U-Verse and DIRECTV without losing its customer base.