AT&T's $50B interest in DirecTV is just one part of an ambitious expansion
- 15 May, 2014 02:46
AT&T's potential purchase of satellite TV provider DirecTV for $50 billion is only the latest in a series of moves by the wireless carrier that shows it's hell-bent on expansion.
It's eyeing networks of all types -- wired, wireless and satellite -- and aims to get there by building its own or by buying other companies ouright. The strategy involves out-doing Verizon, Google, Amazon or other competitors so it can hold onto existing customers as new networks emerge that allow video gaming and other services over the Web.
While the dollar value of a DirecTV deal would be colossal by any measure, it comes just weeks after AT&T disclosed plans to build a gigabit fiber network in up to 21 cities to compete against Google Fiber; announced plans to offer fast LTE wireless connections to planes for faster onboard Wi-Fi; and has a range of upcoming initiatives for connecting wireless to GM cars and home monitoring systems. Those moves don't include the carrier's already established network of some 34,000 Wi-Fi hotspots nationwide.
Now the nation's second-largest wireless carrier, AT&T has 116 million wireless customers -- close behind Verizon Wireless -- and 16 million wired broadband subscribers, giving it a solid foundation on which to grow even bigger.
"AT&T is basically trying to sell more things to the same people, which should be easier than selling the old products to new people, although one doesn't exclude the other," said Roger Entner, an analyst at Recon Analytics. "AT&T is doing more of this than Google or Verizon or anybody and is absolutely at the forefront of selling more things to their customers. That's the nature of American business: if you don't offer something, somebody else does."
What's unusual with AT&T is that so many of its expansion efforts are happening at once and are so expensive.
Entner believes that AT&T's latest moves evolve from an overall strategy in which the U.S. telecommunications market has become saturated with now-conventional technologies.
"The wireless market is the last to enter the saturation point and the only way to get more revenue is by getting more money from the same people," Entner said. "From the wireless perspective, first you sold voice, then text, then data, then a smartphone and a tablet and now AT&T wants to sell you home monitoring and TV services where you are and also to sell it to you at home with DirecTV."
Entner believes if federal regulators approve the $45 billion Comcast takeover of Time Warner Cable, it would be logical to assume regulators would allow AT&T to buy DirecTV. "It would be the same logic: if you allow a massive TV giant on the ground with Comcast-Time Warner, then you should have no problem allowing a small terrestrial TV provider in AT&T to take over a satellite TV provider," Entner said.
Combining AT&T and DirecTV would create a pay TV company close in size to Comcast-Time Warner.
AT&T and DirecTV officials declined to comment on reports of a deal in the works.
The carrier's strategic thinking is primarily about AT&T "looking over its shoulder at the competition, which includes Verizon but also Comcast with Time Warner and Google branching out," said Jack Gold, an analyst at J. Gold Associates. "It's a play to keep consumers funding AT&T rather than others...to consolidate services in the expanding market of connectivity to home, office, cars and more. "
AT&T has to be ambitious to survive, added Rob Enderle, an analyst at Enderle Group. "Companies have to invest in the future or they'll go under," he said.
Patrick Moorhead, an analyst at Moor Insights & Strategy, said AT&T's moves are clearly intended to "gear up for battle with Google and Verizon. To successfully compete, all the players have to scale up in buying content, installed seats and bandwidth and AT&T's rumored acquisition of DirecTV would provide all three."
In recent years, AT&T "had its hands full just keeping up with the iPhone and smartphone growth and now that the growth is slowing, AT&T has to look to other areas...," said independent analyst Jeff Kagan.
"I think this is just the new world" in networking, Kagan said. "We had better buckle our seatbelts and tune in to other industries, because AT&T and other companies are going to be expanding into other industries, one after another."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is email@example.com.
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