AT&T-DirecTV Deal: Documents Access Case Might Delay Regulatory Approval

AT&T's acquisition of satellite-TV provider DirecTV and the merger between Comcast and Time Warner Cable could be delayed as an ongoing federal case about access to sensitive cable industry documents is complicating the review process. AT&T had agreed to acquire DirecTV in May of last year and regulatory approvals by the Justice Department and the Federal Communications Commission were expected to take about a year.

According to a recent report, a three-judge panel of the U.S. Court of Appeals voiced concerns over the FCC granting limited access of confidential cable-industry business documents and contracts to competitors such as Dish Network. A lawyer arguing for the content companies said that the FCC’s decision to grant access was “totally unprecedented” and that disclosure of the documents “would be highly damaging” to the interests of his clients. On the other hand, the FCC argued that it had strong protections in place for restricting access to the documents.

The U.S. appeals court has blocked the FCC from allowing access while the case continues and the court has asked the FCC to demonstrate the relevance of allowing such access for reviewing the deals. Since the court did not specify any date for concluding the case, there is widespread speculation that it is likely to delay the review process of AT&T’s proposed acquisition of DirecTV.

See our complete analysis for AT&T here

AT&T’s acquisition of DirecTV is likely to enable it to become a leader in content distribution across various platforms including mobile, broadband and TV. In addition to the strategic benefits, AT&T will also benefit from DirecTV’s significant cash flows, and there would be substantial cost savings because of business synergies with the satellite-TV major. The companies expect cost synergies of over $1.6 billion annually within three years of the deal closing, primarily on account of the increased scale of their video subscriber base. Additionally, DirecTV’s established satellite-TV business in Brazil could provide AT&T a head start in entering the lucrative and high-growth Latin American pay-TV and broadband market.

We have a $37.50 price estimate for AT&T, which is about 10% ahead of the current market price.

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