AT&T shareholders have less, in the immediate term, to rely upon. EPS and FCF growth is forecast to come in 12-months after the deal closes.
The extent of AT&T's commitments such as a pricing freeze on DIRECTV service for three years, a pledge to net neutrality for three years, rising investment in rural broadband service and the company's $9 billion minimum bid in a 2015 spectrum auction also underscores that the deal faces regulatory risk.
Strategically, there are also risks.
Has the pay TV market peaked? Should investors be excited about AT&T's push into Latin America by way of DIRECTV's subscriber base in the region? Is there really much technological fit between AT&T's wireless and broadband infrastructure and DIRECTV's satellite and spectrum service? Can AT&T and DIRECTV successfully create an over-the-top video service bundle?
Those questions will now loom over AT&T as it works to close the DIRECTV deal, and in the 12-months after any prospective deal close.
"We are going to have a lot of new models emerge as a result of putting these two companies together, and that's what we're excited about," CEO Randall Stephenson said on a Monday conference call. It is unclear whether AT&T shareholders are as excited about the deal.
AT&T shares were falling over 1.5% to $36.12 in Monday afternoon trading.
Bottom Line: AT&T and Verizon entered 2014 with similar strategies and a comparable financial picture. AT&T's decision to buy DIRECTV will now create clear distinctions when compared against Verizon's bid for full control of Verizon Wireless.
-- Written by Antoine Gara in New York.