Why AT&T Needs to Buy a Satellite Operator

By year-end, but possibly early next year, AT&T Inc. (T) will buy a satellite operator to provide TV service to the half of the folks in its territory that won’t have access to its IP-based U-verse. My bet is DISH Network Corp. (DISH).

Why buy? Because AT&T is fast approaching the end of a multi-year resale-type deal with DISH, whereby it provides the Telco’s current Homezone video and Internet package. AT&T has already told DISH the deal is up at year-end, which was part of the original agreement.

AT&T wants what DISH does officially under the AT&T umbrella. Why? Because right now, AT&T gives the separate company capital that it would prefer to keep for itself in this worsening economy that’s seeing the Telco cut capex for this year... and likely beyond.

AT&T also needs to control the video services it provides, whether from the ground or from the skies. Providing separate services from different companies has already created a muddied marketing message, industry experts concur.

Is there a chance AT&T wouldn’t grab DISH? Sure. Stranger things have certainly happened with AT&T. But, I wouldn’t bet on it. It seems like there’s an anti-resale sentiment at high levels in AT&T. And with the DISH deal ending at year-end, it would seem AT&T would want to avoid service disruption to Homezone users.

Is there a chance AT&T wants to first see a bidding war between DISH Networks and The DIRECTV Group (DTV) to be the Telco’s entity? Definitely, as it would serve to make an acquisition less expensive. And AT&T has worked with DIRECTV too, as has Verizon Communications Inc. (VZ).

Would Verizon let AT&T walk away with its satellite TV resale partner? Does AT&T even need to go there?

Are there other options? Yes, SES-Americom Inc. already wholesales a managed, turnkey IPTV package to service providers looking to avoid the capex associated with buy headends and other price equipment. Hmmmm.

Programming-wise, DIRECTV could be more alluring as it has the coveted NFL Sunday Ticket package. I can’t remember who has the most HD channels, but that could be an important factor.

What could/would DISH cost? I’m not a numbers guy, so I can’t help you there. Same for DIRECTV.

Can AT&T afford to buy a satellite operator in a plunging economy and in an environment where cost avoidance is becoming the phrase of the day? Those two reasons could also be the ones to fuel an acquisition.

So the real question becomes, can AT&T afford NOT to buy a satellite operator, roughly two years after it’s commercial launch of U-verse? And with video its core wire line focus? I say no.

What do you say?

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