Why Does AT&T Want to Buy Satellite-TV Technology?

NEW YORK (TheStreet) -- When AT&T announced plans to buy satellite-TV operator DIRECTV (DTV), industry watchers were left perplexed that a broadband and wireless company would want to execute a $48.5 billion deal to acquire an operator of satellite-TV when that technology is being fast outmaneuvered by new high-speed fiber-optic networks owned and operated by cable-TV providers.

Investors continued to question AT&T's move for DIRECTV, selling shares in the stock which fell for a second day on Tuesday, falling 1.2% to $35.95. DIRECTV also slipped, losing 0.8% to $83.99.

While DirecTV has more than 20 million subscribers in the US alone, domestic growth has slowed and even fallen in some regions. Streaming outfits like Netflix (NFLX) and Hulu, a venture of Comcast's (CMCSA) NBCUniversal, 21st Century Fox (FOXA) and Walt Disney's (DIS) ABC Television Group  are disrupting the business models of not just satellite but cable-TV companies as well. Comcast has had to seek growth through the acquisition route as it attempts to win government approval to buy Time Warner Cable (TWC).

For AT&T, whose convergence brand U-Verse--a mix of telephony, internet, and pay TV-- has around 5 million subscribers, it became necessary to match Comcast's moves, even though the industry outlook overall remains bleak.

The challenge for the new entity will be how to manage the expectations of the new age customer, who has an Internet-centric view of the world, and wants higher bandwidth every year to consume rich media content, where TV is just one part of the big picture.

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