With industry sands shifting, and the Internet changing everything, telecom giant AT&T (NYSE:T) is thinking outside the box for attractive acquisitions like satellite TV giant DirecTV (NASDAQ:DTV). 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.
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Andrew Tonner has no position in any stocks mentioned. The Motley Fool recommends DirecTV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.