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AT&T Defends Proposed $48.5 Bln Acquisition Of DirecTV

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Telecom giant AT&T Inc. (T: Quote) on Wednesday defended its proposed $48.5 billion acquisition of satellite television company DirecTV (DTV: Quote), saying that a combined company would be able to offer new and better service bundle as well as create a stronger competitor to large cable providers, resulting in overall net benefit to consumers.

In a filing with the Federal Communications Commission or FCC, AT&T noted consumers are increasingly buying an integrated bundle of video, voice and broadband service to obtain greater convenience at a lower price.

However, DirecTV's one-way video delivery service lacks broadband capabilities, while AT&T's video service is available in only a minority of customer locations where its U-verse video service is deployed. As a result, each company cannot provide an integrated and efficient bundle of high-speed broadband and high-quality video from a single provider on its own.

According to AT&T, by uniting its wireline and wireless broadband infrastructure with DirecTV's nationwide video service under common ownership, the combined company would be able to bundle broadband and video as well as wireless services in ways that it could not without the transaction.

AT&T noted that it can only provide video service, and thus a broadband/video bundle, to those homes where it has deployed "fiber to the node" or "fiber" to the premises" technologies.

While the company plans to cover about 33 million customer locations with these technologies, the geographic region covered would still be less than one-quarter of U.S. TV households. The company said it also faced challenges selling competitive broadband/video bundles even inside its U-verse video footprint.

"Cable has long been the dominant provider of broadband and video services in the United States, and if the Comcast/Time Warner Cable/Charter transactions are completed, that dominance will swell even further. By uniting AT&T's wireline and wireless broadband infrastructure and DirecTV's nationwide video service under common ownership, the combined company will be able to bundle," AT&T said.

According to AT&T, it expects to bring new or enhanced high-speed broadband to at least 15 million consumers, with the majority of the customers in rural areas. The company said it was confident of savings and other synergies that it is willing to meet this target within four years from the close of the transaction.

AT&T has said it expects cost synergies to exceed $1.6 billion annual run-rate by three years after closing. The company anticipates savings to begin in the first year after closing, ramp up over four years and grow with the addition of video subscribers thereafter.

Further, AT&T said it will adhere to the FCC's Open Internet protections or net neutrality rules established in 2010 for three years after closing. The company added that for three years after closing, it will continue to offer standalone retail broadband Internet access service at reasonable market-based practices.

AT&T also committed to offer, for three years after closing, standalone DirecTV satellite video service at nationwide package prices that will not differ between AT&T customers in its wireline footprint and customers outside the footprint.

The deal requires approval of both, the Justice Department and the FCC.

T closed Tuesday's trading at $34.81, down $0.13 or 0.37 percent on a volume of 16.33 million shares. DTV closed trading at $82.99, up $0.07 or 0.08 percent on a volume of 2.41 million shares.

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by RTT Staff Writer

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