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AT&T Considers DirecTV Purchase: Reports

With the proposed merger of the nation's two largest cable operators in the review process, reports indicate that AT&T may be interested in purchasing DirecTV, which is the leading U.S. satellite-TV provider and the second-biggest U.S. multichannel video distributor.

According to The Wall Street Journal, AT&T has made an inquiry to buy DirecTV for some $40 billion, a union that could result in a combined entity reaching some 26 million video subscribers. Such a combination could trail the proposed union between Comcast and Time Warner Cable by about 3 million subscribers and further consolidate the U.S. distribution industry.

DirecTV said it “doesn’t comment on speculation,” while AT&T could not be reached for comment late on Wednesday night.

The report of a potential AT&T-DirecTV combo follows news on Monday that Comcast has agreed to divest about 4 million customers to Charter in a trio of deals worth about $20 billion. Comcast on Feb. 13 agreed to acquire Time Warner Cable, in a deal worth about $69 billion that will boost the combined company’s reach to just under 30% of the television households across the country. Should the union past federal muster and the deals with Charter come to pass, Comcast would have some 28 million to 29 million video subs.

The deal speculation drove DirecTV stock up by more than 8% in early trading Thursday to $84.20 pr share. The stock had begun to settle down in later trading, priced at $81.86 each (up 5.5% or $4.25 per share) later in the day. AT&T shares were down slightly -- 8 cents each or 0.2% -- to $35.62 per share.

Already though, some analysts are expressing some skepticism about a deal, noting that AT&T has been the subject of deal rumors in the recent past regarding DirecTV, Dish Network and British wireless giant Vodafone.

"It feels to me like strategy by process of elimination -- first Vodafone, then Dish, now DirecTV -- rather than by a disciplined strategy of acquiring the right set of assets to compete," MoffettNathanson principal and senior analyst Craig Moffett said in a research note. "That is usually a terrible way to build a company. It could probably be approved, but if you're AT&T, be careful what you wish for."

A merger of AT&T and DirecTV would not only be within about 3 million video subs of the combined Comcast-TWC, but such an entity could make for a more formidable bundled player. The telco and the DBS company already have an extant relationship that packages video and cell phone services, but a union would add a high-speed component.

DirecTV added about 93,000 net new customers in the fourth quarter to finish 2013 with 20.25 million customers,

AT&T added 200,000 subs in the first quarter to conclude the period with some 5.7 million U-verse video subscribers. U-verse broadband posted a net gain of 634,000 subs to close the quarter with some 5.6 million of those customers, as the telco racked up a seventh consecutive period of gains in excess of 600,000 high-speed subs.

Last month, there were reports that Dish Network chairman Charlie Ergen had approached DirecTV chief Mike White about a union that could have had as many as 34 million video subs.