"The world has become a tougher place for DirecTV since 2010, whenAT&T Inc. unsuccessfully tried to buy the satellite-TV operator. After years of outperforming the rest of the pay-TV industry, subscriber growth has slowed sharply while programming costs are rising and cheap online video alternatives are multiplying.
In response to changing market conditions, DirecTV's satellite-TV rival Dish Network Corp. has invested billions of dollars in trying to diversify into wireless broadband and launch its own online-video service.
DirecTV, in contrast, has bought back stock—lots of it. The company has spent $29.7 billion on repurchases in the past eight years, according to regulatory filings. DirecTV has taken some steps to develop online-video services but it isn't as advanced as Dish, which hopes to offer its service beginning this summer, people familiar with the matter say.
DirecTV's strategic position is in the spotlight now that AT&T has come back with yet another approach, as The Wall Street Journal reported late Wednesday.
DirecTV stock rose 4% on the report, lifting its market capitalization—and rough purchase price—to $41.1 billion
A person close to the situation says DirecTV, which became independent in late 2009 when its then-biggest shareholder Liberty Media Corp. divested its stake, is likely open to a sale. The company's board, say people familiar with the situation, is concerned with satellite TV's Achilles' heel: its inability to offer an Internet-access broadband service competitive with the packages delivered by cable and phone companies.
While the biggest cable and phone companies offer broadband speeds of up to 500 megabits a second, with some planning gigabit-per-second services, technological differences mean that satellite companies typically offer no more than 10-15 megabits a second.
That means even if DirecTV rolls out an online-video service, its customers would likely be using broadband supplied by rival cable or phone companies. DirecTV's board is worried about the possibility that cable and phone companies could raise the price of broadband connections, disadvantaging DirecTV as an online-video alternative, one of the people said".
Source: WSJ
Source: WSJ
