With the changing landscape of wireless technologies and consumer demands, telecommunications and wireless company mergers often make headlines. Louisiana residents familiar with these companies may be aware of the $45 billion Comcast-Time Warner merger. Now, only a few months later, AT&T has proposed to acquire DirecTV for about $48 billion.
Such billion dollar transformative mergers between cable, satellite providers and telecommunication companies are a complex matter, and will likely be closely scrutinized by governmental regulators. Generally, regulatory issues in such proposed mergers revolve around the impact these new business relationships will have on the marketplace and consumer. Some are concerned that such mergers favor bigger companies and not the consumer.
In the case of the proposed AT&T-DirecTV merger, since 2009 the companies were already in a partnership wherein AT&T provided some services to DirecTV customers which DirecTV would not have been able to provide on its own. Thus, if the proposed merger passes regulatory scrutiny then it is an attractive proposition for both sides.
Analysts closely watching the merger note that given how AT&T and DirecTV systems are completely different, wherein the former provides phone and internet service while the latter provides programming, the two companies will be able to better negotiate with content providers. In essence, the companies provide complimentary services. Thus, if the merger goes through, in terms of subscribers, AT&T-DirecTV would exceed those of Comcast which currently has 27 million paid subscribers.
Both companies are expected to be closely scrutinized by not only the Department of Justice but also the Federal Communications Commission. For the AT&T-DirecTV merger to be a reality, both the DOJ and FCC must sign off on it.
It is no secret that mergers of this magnitude will face regulatory issues and be closely examined to ensure that consumers have a choice and that the merger does not result in a monopoly. During such complex business transactions it is extremely important for companies to work with a business law firm familiar with regulatory issues to ensure that the process goes smoothly and aligns with business goals.
Source: CNN Money, “AT&T-DirecTV merger: Heavy regulatory scrutiny ahead,” May 21, 2014