Why AT&T's Deal for DirecTV Makes No Sense

NEW YORK (TheStreet) -- Telecom giant AT&T's (T) $48.5 billion deal for satellite TV provider DirecTV (DTV) has raised plenty of questions within the telecom and media space.

Some believe AT&T is making a strategic error and is overspending for the DirecTV, given its new valuation at about $95 per share. Others are applauding the potential costs savings and long-term accretive benefits.

When rumors of the deal, which will be financed in cash and stock first emerged, I didn't like it. It considered AT&T's entry into the realm of mobile and online video streaming. But now that it has become official, it still doesn't make sense. In this brief video, I explain why.

Good for DirecTV and customers. But something's still missing.

It's a great deal for DirecTV and its shareholders. And customers are certain to enjoy the benefits of bundling and the added convenience of having their Internet service, pay TV and mobile phone arrive on a single bill.

But unless this is part of a bigger plan, which involves more acquisitions, I don't see the logic. Not when it fails to address Internet services, which, the combined entity of Comcast (CMCSA) and Time Warner Cable (TWC) is poised to dominate.

With AT&T stock trading at around $36 per share, investors should hope federal regulators protect the company from itself by blocking this deal. With AT&T stock trading down 1.42% Tuesday morning, the Street seems tuned out.

At the time of publication, the author held no position 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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