With industry sands shifting, and the Internet changing everything, telecom giant AT&T (T -1.37%) is thinking outside the box for attractive acquisitions like satellite TV giant DirecTV (DTV.DL). According to recent reports, AT&T has approach DirecTV to discuss a possible acquisition that could hold big implications for both the U.S. telecom and television space at the same time.
But does a tie-up between AT&T and DirecTV make sense?
AT&T and DirecTV: Making the odds
At its highest level, a deal between AT&T and DirecTV certainly makes sense. Similar to the telecom space, the TV distribution space is also a business where economies of scale can constitute a key competitive advantage. The big fish wins an awful lot; so, by combining forces, AT&T and DirecTV could more effectively compete for subscribers. The AT&T and DirecTV tie-up makes all the more sense with the impending Comcast and Time Warner Cable merger, as well.
However, AT&T's never been afraid to let its eyes be bigger than its stomach. AT&T paid an extremely high cost when it proposed a purchase of telecom upstart T-Mobile in 2011 that's coming back to bite it big time today. Although different, AT&T could run a similar risk with DirecTV, as well.
In the video below, tech and telecom analyst Andrew Tonner discusses the AT&T and DirecTV merger news in greater detail.
