AT&T shed more light on the cost synergies -- and new revenue opportunities -- that it expects to realize through its takeover of DirecTV, including shaving down programming costs by 20% or more.
The telco has said it expects to save $1.6 billion per year within three years after the closing of the DirecTV deal, with at least 40% of that realized by year two. Those estimates are "conservative," the telco said in a filing Tuesday with the Securities and Exchange Commission.
"The deal provides significantly greater scale in video, affording us the ability to offer programmers better value and therefore the opportunity for us to obtain correspondingly better per-subscriber content costs," AT&T said in the filing.
SEE ALSO: AT&T Will Retain U-verse TV, Won't Force Customers to Switch to DirecTV
AT&T had 5.7 million U-verse TV subscribers at the end of the first quarter of 2014, making it the fifth-biggest U.S. pay-TV provider.
In addition to cost savings, AT&T said it has big opportunities to cross-sell services with DirecTV.
With the deal, the combined company would be able to offer a pay-TV, broadband and mobile service bundle to at least 70 million customer locations, as well as a TV-and-wireless bundle to another 45 million U.S. consumers.
Furthermore, AT&T said, it will be able to use its 2,000-plus company-owned stores and 10,000 retail locations of the combined company's resellers to market the new bundled services. Currently, about 50% of AT&T retail stores do not sell a pay-TV product.
The cost savings from the deal will let AT&T upgrade 2 million additional locations to 1-gigabit-per-second fiber-based broadband and expand its U-verse high-speed broadband footprint to an additional 13 million locations, the telco said.
And AT&T sees new revenue opportunities in the business market. With DirecTV, AT&T will be able to offer a "compelling video service" to hotels, restaurants and bars, real estate managers and developers and other commercial locations, bundled with the telco's other services.
AT&T's proposed $67 billion acquisition of DirecTV is pending regulatory approval. The companies have said they expect the approval process to take up to 12 months.
2014 Variety Media, LLC, a subsidiary of Penske Business Media; Distributed by Tribune Content Agency, LLC
AT&T Expects DirecTV Deal to Cut TV Programming Costs by At Least 20%
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