AT&T announces deal to acquire DirecTV LocalTVKDVR

According to Light Reading, MKM Partners on Tuesday put out a research note suggesting that AT&T has a temporary freeze on many wireline and wireless capex (capital expenditures) projects. This would run counter to previous suggestions that in 2014, AT&T would decrease wireline capex projects while increasing wireless capex projects (and overall stay flat between the two).

One of the few projects that seems to have survived this freeze is called Project Stream. We know very little about this other than it deals with video broadcasting over LTE. Unfortunately, AT&T isn’t going into any more detail on what Project Stream is at the moment.

This is not the first time that investors have been told that investment by AT&T would be on hold or even decreased for the foreseeable future. Some on Wall Street are wondering why AT&T would be trying to acquire DirecTV with a near $50 billion deal and whether that money would be better spent on their wireless business.

Craig Moffett tells Bloomberg News he doesn’t really see the point in the deal noting that satellite is a no-growth business. Jefferies analyst Mike McCormack believes that, “AT&T is better served preserving its balance sheet for upcoming wireless auctions, and continued investment in next generation wireless and wireline projects.”

CTIA-capex TMFAssociates

In a recent filing with regulators, AT&T made a rather comical case that a merger with DirecTV would allow them to build out their 1 Gbps (Gigapower) service to over 2 million people. Setting aside the fact that zero people currently have the Gigapower service (some have the 300 mbps service but not the 1 Gbps service), AT&T continues issuing press release after press release about their Gigapower service yet investors are being told on multiple occasions that AT&T won’t be spending much money on the initiative.

Translation: Gigapower is nothing more than a project that AT&T wants to use for PR to show that Google Fiber is not beating them.

We’re in the heart of the age of “fiber to the press release” and 1 Gbps mania, where all you need to do is simply mention 1 Gbps and you get a ticker-tape parade and a statue in the town square without having to deliver a single byte. AT&T’s certainly counting on that reaction from the press and public. Look for specifics as to how many users will actually get 1 Gbps “Gigapower” service and at what cost to AT&T, and you’d be hard-pressed to find any whatsoever. That’s because “Gigapower” is about 10% actual broadband, and 90% bologna. –

It seems that when AT&T started 2014, they planned on cutting wireline investments and increasing wireless investments. But, will those investments still occur if they spend billions on DirecTV? Will they take some investment out of their wireless business for their phantom Gigapower service?