AT&T’s decision to use a “derivative” of DirecTV’s gatewayclient architecture will position the pay TV provider to use a more uniform, cloud-based platform, while also flashing the spotlight on why Arris is eager to merge with U.K.-based Pace.
The decision to shift U-verse TV to DirecTV’s Genie-style multiroom platform came up last Wednesday (Aug. 12) during AT&T’s Analyst Day, coming on the heels of the telco’s acquisition of the satellite-TV giant.
The technological shift will provide AT&T with “one consistent architecture” for both managed and unmanaged content, John Stankey, CEO of AT&T Entertainment & Internet Services, said. The plan is to enable subscribers to access their video content both in the home and on the go, he noted.
IMPLICATIONS FOR ARRIS
AT&T’s decision to transition to a common set-top box with the Genie platform has some implications for Arris, which supplies boxes for U-verse. Pace is a leading set-top box supplier to DirecTV.
Word of AT&T’s strategy “highlights the importance of Arris closing the deal” for Pace, Raymond James analyst Simon Leopold said in a research note. Arris and Pace expect to close their proposed $2.1 billion merger late this year.
The coming strategy shift also underscores “further weakness in the telco business, as we expect AT&T to pivot its video investment towards satellite delivery following the close of their DirecTV acquisition,” Leopold added, noting that AT&T represented 11.5% of Arris’s 2014 sales.
But merging with Pace doesn’t necessarily mean Arris will be a shoo-in at the new AT&T, as both Humax and Samsung are approved Genie box suppliers, Leopold said. He said he sees AT&T’s focus on a hybrid IP-satellite platform as a “conservative” $2 billion opportunity in the coming years.
At this stage, Leopold estimates that perhaps 10 million subscribers out of a total universe of 45 million (DirecTV plus U-verse) get a Genie-powered package.
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