AT&T Expects Cost Synergies From DirecTV Deal To Exceed $1.6 Bln

(RTTNews) - Telecom giant AT&T Inc. (T), which has offered to acquire satellite-TV company DirecTV (DTV) for $48.5 billion in a cash and stock deal, said in a regulatory filing that it expects cost synergies to exceed $1.6 billion annual run-rate by three years after closing.

AT&T expects savings to begin in the first year after closing, ramp up over four years and grow with the addition of video subscribers thereafter.

It is expected that at least 40 percent of these total synergies will be realized by the second year after closing. These synergies are conservative and expect to be derived from programming cost reductions, operational efficiencies and reductions in redundant broadcast infrastructure.

AT&T's U-verse content costs after the completion of the transaction will be reduced by 20 percent or more as compared with forecasted standalone content costs.

DIRECTV has service available to 115 million households. However, it lacks an integrated broadband service to bundle with its video product.

According to AT&T, this transaction is a clear combination of complementary assets and capabilities that creates a strong consumer bundle which will also drive improvements in customer retention.

The company also expects significant revenue-related synergies not currently factored in the $1.6 billion cost synergies. These revenue opportunities are in the areas of bundling, video content to multiple screens, cross selling and advertising.

Further, AT&T said DirecTV's business in Latin America offers unique opportunities for new revenues and growth. It already has spectrum covering 43 million homes in Brazil, Colombia, Peru and Argentina with which it is expanding its offering of fixed wireless local loop broadband service.

When combined with AT&T's scale and expertise in wireless data and broadband services, DirecTV will be able to offer video and broadband bundles to customers in these under-penetrated areas.

T closed down 0.7 percent on Tuesday at $35.20.