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AT&T CFO Talks Video, Regulatory Advantages of Choosing DirecTV Over Dish

By Ben Munson | May 21, 2014

When asked why AT&T went after DirecTV and not Dish Network, AT&T CFO John Stephens said DirecTV had better distribution, content, network, etc. But he also said Dish raised a lot more regulatory red flags.

“Dish has been very loud about their intentions to get into broadband,” Stephens said, speaking at an investor conference. AT&T feared that potential services overlap, along with Dish’s plans to use its spectrum for wireless, would raise more regulatory concerns.

AT&T on Sunday announced a merger with DirecTV valued at $48.5 billion, which led to speculation that Dish could be a target for Verizon as it looks to keep pace with its biggest competitor. But Verizon CEO Lowell McAdam Tuesday thoroughly debunked that theory, saying his company has had no talks with Dish and no interest in buying a satellite-TV provider.

Happy with DirecTV, Stephens seemed very excited about the transaction, saying it builds on AT&T’s Project Velocity IP. Describing future video products from the combined company, Stephens said they’d “take the best of both offerings and add them to the other.”

DirecTV and other pay-TV service providers have seen a slowdown in subscriber growth. But the flattening of linear video business didn’t seem to concern Stephens too much, who said he still saw growth in that model and also witnessed a lot of OTT in addition to linear TV.

As far as opportunities for a larger OTT video play, Stephens said there’s an chance at approaching 70 million customers on AT&T’s network who don’t currently have a subscription video service, and offer them a unique video product combining wireless, broadband, and satellite.

“We’ve seen the desire to utilize our wireless networks,” Stephens said, adding that DirecTV’s compelling content will only accelerate that use.

Of DirecTV’s content portfolio, the deal with the NFL has gotten the most attention. AT&T wrote into the agreement that it can pull the plug on the merger should DirecTV not renew its NFL Sunday Ticket deal. But Stephens seemed confident, based on League officials speaking well of DirecTV, that the deal would get done.

So DirecTV brings the NFL and other advantages, but Dish’s available wireless spectrum looked like it might have been enough to attract a suitor like Verizon or AT&T.

But Stephens didn’t seem concerned about no spectrum coming along with the DirecTV deal. He said AT&T has been busy going after spectrum deals, pointing to the airwaves it got from Cricket and another 60 spectrum deals. He added that the carrier is geared up for upcoming spectrum auctions.

He touted AT&T’s balance sheet as a driver of acquisitions like this as well as helping in future spectrum auctions.

 “We believe the auctions will be competitive,” Stephens said, adding that a strong balance sheet like AT&T has will be the advantage.

But could the current wireless price war eat into that balance? Stephens said that competition is nothing new in the industry but admitted that reactionary moves AT&T and other carriers have made will affect financials in the short term.

“It will make our results lumpy,” Stephens said of the shift of customers moving away from device subsidies, saying that model accelerates other monetization opportunities like device insurance.


Filed Under: Carriers

 

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