Forget DirecTV -- AT&T Should Buy Netflix or Dish: StockTwits

NEW YORK (TheStreet) -- AT&T  (T) and DirecTV  (DTV) investors are none to happy about reports that AT&T is discussing buying the satellite television service for nearly $50 billion. Many on StockTwits.com said that the combined satellite/telecommunications company would result in few synergies and could push the companies in the wrong direction.

Market doesn't seem to be all to wild about the $T for $DTV talk. stock gave back all early gains.

? Brian Bolan (@bbolan1) May. 13 at 01:33 PM

Shares of DirecTV fell more than 1% by 3:30p.m. Tuesday, to $86. AT&T fell a bit more to 1.1%, or just over $36. AT&T is likely interested in DirecTV because it would give them the national television presence that competitors already boast. Verizon  (VZ) has FiOs television, for example.

DirecTV would also provide an international television presence. DirecTV has 20.27 million subscribers in Latin America who spend an average of $48.83 per month, according to the company's last quarterly report.

However, some AT&T shareholders fear that the company will have to overpay for these benefits, given DirecTV's $44 billion market cap and price-to-expected-2015-earnings ratio of nearly 13.

DirecTV has 38 million subscribers. Using the admittedly oversimplified math of dividing the proposed purchase price by subscriber base, the deal values each DirecTV subscriber at more than $1,100 each.

$DTV with a high market cap this deal may become very complicated

? rob (@hack85) May. 13 at 12:59 PM

Brean Capital analyst Todd Mitchell said they are looking for an offer from AT&T in excess of $100 per share for DirecTV. $DTV $T

? Vconomics (@Vconomics) May. 13 at 09:31 AM

Of course, AT&T wouldn't just get current subscribers with the deal. AT&T also gain DirecTV's growth. DirectTV added 12,000 new U.S. subscribers in the first quarter of 2014, after adding 21,000 subscribers in the same quarter last year. It added 109,000 subscribers in the quarter in Latin America -- less than the 208,000 subscribers added in the year-ago quarter.

AT&T would also gain the ability to upsell DirecTV's subscribers on phone service and wireless service.

$T?s bid for $DTV is a longterm strategic decision to spur growth, may not be obvious to most short-sighted investors http://stks.co/t0Jla

? Bidness Etc (@BidnessEtc) May. 13 at 06:47 AM

Some investors said that AT&T shouldn't bank that DirecTV will be able to continue to grow its Latin American business at such a clip. The company's Sky Brasil and Pan Americana services are facing increased competition from domestic competitors such as Embratel.

Problems for AT&T and Directv $T, $DTV, $CMSA, $VZ, $DIS, $FOXB, $CBS http://stks.co/f0bx4

? Financial Skeptic (@financialskeptic) May. 13 at 11:59 AM

Investors also said that by looking at each other, AT&T and DirecTV each focused on the wrong direction. They should each seek to expand with companies that have a strong on-demand, Internet television offering with proprietary creative content -- such as Netflix  (NFLX) with Orange Is The New Black. Netflix has just a $28 billion market cap and 48 million members, according to the company's Web site.  

The future of television, they argued, is streaming online. And the services that will become the most valuable will have original shows available just to subscribers. 

At the very least, AT&T should look to buy a satellite network with spectrum, such as Dish Network  (DISH) to help expand its wireless offerings, said StockTwits users.

AT&T Should Not Buy DirecTV http://stks.co/p0JzZ ? $DISH $T $DTV

? RiFF RAFF (@Exsertus) May. 12 at 07:13 PM

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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