DIRECTV moves a step torward merger with AT&T

 

DIRECTV (DTV) has moved one step forward regarding its proposed merger with telecom giant AT&T Inc. (T) with the renewal of its existing contract for National Football League's (NFL) “Sunday Ticket” package. Although the financial terms are undisclosed, industry sources revealed that the new deal will extend the broadcasting right for another 8 years for a total consideration of $1.5 billion per annum.

The agreement between DIRECTV and NFL over Sunday Ticket was first inked in 1994. The existing deal will come to an end in 2014 for which DIRECTV is paying $1 billion per year to NFL. The Sunday Ticket program acts as a major growth driver for DIRECTV, especially with regard to its average revenue per user. The package boasts nearly 2 million subscribers.

Meanwhile, in May 2014, DIRECTV, the largest satellite TV operator in the U.S., reached a definitive agreement with AT&T to sell its business to the latter for $48.5 billion. The deal, which is expected to close within the next twelve months, now awaits the approvals of regulators. However, AT&T had the right to call off the deal if DIRECTV failed to renew its contract with NFL.

The new deal with NFL will allow DIRECTV to stream Sunday matches on mobile devices such as smartphone and tablet, through broadband Internet service.

Notably, AT&T’s rival Verizon Communications Inc. (VZ) also has an existing 4-year $1 billion per annum deal to stream NFL games for mobile phone users. This deal will continue til 2017. Therefore, if AT&T gets the regulatory nod to acquire DIRECTV, the company will be able to compete with Verizon.

Earlier this year, ESPN, a division of The Walt Disney Co. (DIS) renewed its existing contract with NFL for Monday Night Football. The new deal will continue till 2021 for which the fees to NFL have increased from $1.1 billion to $1.9 billion per year.
 
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