AT&T shrugs off failed Comcast-TWC deal, expects mid-year close
While Comcast’s attempt to consolidate the cable market by purchasing Time Warner Cable is dead, AT&T’s somewhat connected pending acquisition of satellite television provider DirecTV appears to be on track. In fact, confidence is so high on the deal that AT&T this week raised $17.5 billion in a bond offering to help pay for the $48.5 billion deal.
The bond offering, which The Wall Street Journal said was the second largest of the year, calls for the deal to close by Nov. 30 or AT&T must redeem a hefty portion of the notes “at a redemption price equal to 101% of the principal amount of the notes, plus accrued but unpaid interest to, but excluding, the redemption date.” The Wall Street Journal cited an investor following the sale as stating the bond offer drew approximately $68 billion in orders, suggesting a positive reaction to the offering.
“We think it’s a reasonable entry point for AT&T,” said Jon Curran, a portfolio manager at Standard Life Investments, which put in an order for the new AT&T bonds, told The Journal. “This is an example of a large bond deal that offers good value.”
While the DirecTV deal has dragged a bit since being initially announced last May, AT&T’s management recently stated they were expecting government approval by mid-year. The telecom operator further bolstered its case for the deal by increasing its forecast “synergy” savings from the $48.5 billion deal from $1.6 billion to $2.5 billion three years after the deal closes.
The deal was announced months after Comcast put in its $45 billion attempt to bolster its No. 1 position in the cable space by acquiring No. 2 provider Time Warner Cable. Government regulators last August lumped the two deals together by setting up a steering committee to oversee the deals. That combination came to an abrupt end today as Comcast dropped its offer in light of increased regulatory pressure.
The FCC in mid-March stopped the “time clock” on its review of the AT&T-DirecTV deal at day 170 out of a potential 180-day review period, a stopping point at which it remains.
As part of its offer to acquire DirecTV, AT&T said it would commit to expanding broadband coverage to 15 million rural homes; continue to offer a standalone broadband service providing at least 6 megabits per second speed “where feasible” in current markets at a fixed priced for three years; continue offering a standalone DirecTV service for at least three years; and continue its commitment to net neutrality efforts.
More importantly for the wireless industry, AT&T said it remains committed to spending at least $9 billion in the government’s planned 600 MHz incentive auction scheduled for next year if there is sufficient spectrum made available for a nationwide 20 megahertz footprint. AT&T recently shelled out more than $18 billion tied to winning bids in the FCC’s Auction 97 proceedings.
Bored? Why not follow me on Twitter
