As the latest indication that the U.S. television market and the wireless industry are set to unite, AT&T intends to pay $48.5 billion to acquire DirecTV.
The deal signifies Dallas-based AT&T's urgent need for new possibilities of growth.
The combination with DirecTV would enhance AT&T's packages of cellular, fixed-line phone, TV and broadband services.
The deal will enable DirecTV, the No.1 U.S. satellite TV provider to offer broadband Internet to its 20 million customers.
DirecTV and AT&T announced the deal on Sunday a few months after Comcast offered $45 billion for Time Warner Cable. Currently regulatory approval of the Comcast’s offer is awaited.
AT&T’s offer of $95 per share is a 10% premium over closing of $86.18 on Friday. The cash part of $28.50 a share will be financed with funds on hand, financing already lined up and asset sales.
To convince regulators, AT&T will sell its approximately 8% stake, worth about $5 billion in Carlos Slim's America Movil.
Investors and analysts question why AT&T would acquire DirecTV when growth in U.S. satellite TV subscriptions has slowed down and in the coming years demand for satellite TV will slow further because of the growth of web-based video services such as Hulu and Netflix.
Regulators are likely to question AT&T regarding the deal's effect on competition in areas in which its U-verse service competes with DirecTV in offering television.
Consumer advocates are urging regulators to disallow the deal as in 2001 Dish Network’s bid to acquire DirecTV was disallowed by regulators.