AT&T’s In Final Stretch of Acquisition Drive With DirecTV Deal Closure Looming

NEW YORK ( TheStreet) -- With media and telecom firms in a heated play for scale with a frenzy of mergers and acquisitions, AT&T (T) has honed its takeover strategy -- grow globally and invest heavily this year to expand its customer base.

With two major acquisitions shoring up its market share in Mexico and a takeover deal with satellite TV provider DirecTV (DTV), AT&T anticipates pausing its merger momentum to sift through its new business opportunities.

"We've got our hands full getting the DirecTV deal done," said John Stephens, senior vice president and chief financial officer, at a Wednesday afternoon speech at Jefferies 2015 Tech, Media and Telecom Conference. "You're going to see us focus on DirecTV and getting integrated in Mexico -- getting those networks built and figuring out what we have with regard to the additional optionality we have in Latin America with regard to DirecTV and satellite products."

In its effort to create one network in the U.S. and Mexico, AT&T last month wrapped up its acquisition of Nextel Mexico for $1.875 billion, less about $427 million of net debt and other adjustments. The telecom giant earlier this year closed its acquisition of Mexican mobile carrier Iusacell SA for $2.5 billion and now plans to fold Iusacell and Nextel into one company to anchor into Mexico's mobile market share with what it calls "the first-ever North American Mobile Service area" with more than 400 million customers and businesses in the U.S. and Mexico.

America Movil (AMX) , controlled largely by Carlos Slim, one of the richest men in the world, dominates Mexico's telecom sector, with about 70% mobile market share. But AT&T's recent acquisitions should give it about 11% market share there.

Meanwhile, AT&T is awaiting approval of a $48.5 billion planned takeover of DirecTV, which most expect will be blessed by regulators, unlike the recently collapsed deal between Comcast (CMCSA) and Time Warner Cable (TWX). Reports Tuesday afternoon suggesting the deal should close soon sent shares surging Tuesday, with shares gaining another 1% on Wednesday.

AT&T shares have been fairly volatile over the past twelve months, so far this year, up 1.3% year-to-date, but down 6% from year-ago prices.

Macquarie Research is among several firms with a positive rating on AT&T, recently upgrading the stock to outperform and raising the price target to $37 from $33, citing optimism over the DirecTV deal. "We are recommending that investors begin to buy shares of T now, ahead of formal deal approvals and likely share 'flowback' from DTV holders," said Macquarie analyst Kevin Smithen in an April 23 note. "Our view is that T shares could trade sideways for 2 to 3 months or could trade up about 0%, but downside looks minimal."

Unlike its competitor Verizon (VZ), which recently announced its intent to acquire AOL (AOL), AT&T is expanding its presence in content in a different way.

Today, AT&T announced an expanded deal with Hulu, in which Hulu will offer its services to AT&T customers through AT&T's websites and mobile applications, starting later this year.

"We know that our customers want to be able to access video on multiple devices," said Andrew Goodman, associate vice president, AT&T content acquisition, in a statement.

AT&T's other other over-the-top initiatives include Otter Media a venture with The Chernin Group to invest in, acquire and launch over-the-top video services. For example, Otter Media purchased a majority stake in Fullscreen, a global online media company with more than 50,000 content creators and 450 million subscribers.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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