Tag Archives: Economics

AT&T & DirecTV: The $48.5 Billion Dollar Marriage.

this article comes courtesy of the Associated Press:

LOS ANGELES (AP) — AT&T Inc. on Sunday agreed to buy satellite TV provider DirecTV for $48.5 billion, or $95 per share, a deal both companies described as transformational as they seek to take on cable companies and online video providers, delivering content to multiple screens -on living room TVs, PCs, tablets and mobile phones.

With 5.7 million U-verse TV customers and 20.3 million DirecTV customers in the U.S., the combined AT&T-DirecTV would serve 26 million. That would make it the second-largest pay TV operator behind a combined Comcast-Time Warner Cable, which would serve 30 million under a $45 billion merger proposed in February.

directvatt

“What it does is it gives us the pieces to fulfill a vision we’ve had for a couple of years – the ability to take premium content and deliver it across multiple points: your smartphone, tablet, television or laptop,” AT&T’s Chairman and CEO Randall Stephenson said on a conference call with journalists Sunday.

The companies are aiming to eke out $1.6 billion in annual cost savings in an increasingly expensive and maturing pay TV business. The extra cash flow gives AT&T more ability to invest in its landline and mobile networks for broader reach and faster speeds in a market where it risks falling behind a bulked up Comcast-Time Warner Cable.

The companies promised consumer benefits like more economical bundles that tie mobile phone, pay TV and Internet service together on a single bill.

But the deal could face unique regulatory scrutiny from the Federal Communications Commission and Department of Justice. Unlike the cable company tie-up, the AT&T-DirecTV merger would effectively cut the number of video providers from four to three for about 25 percent of U.S. households. That’s a situation that could result in higher prices for consumers and usually gives regulators cause for concern.

Stephenson said those concerns would be addressed with a number of what he called “unprecedented” commitments. Among them:

– DirecTV would continue to be offered as a standalone service for three years after the deal’s closing.

– AT&T would offer standalone broadband service for at least three years after closing, so consumers could consume video from Netflix and other online services, with download speeds of at least 6 megabits per second where feasible.

– AT&T would expand high-speed broadband access to 15 million more homes – beyond the 70 million that could now get AT&T service – within four years.

– AT&T vowed to abide by the open Internet order from 2010 that the Federal Communications Commission is now in the process of revising after a court struck it down.

– AT&T vowed to sell its roughly 9 percent stake in Latin American wireless carrier América Móvil for about $5 billion.

“This is going to prove to be a pro-competitive and pro-consumer transaction,” Stephenson said.

AT&T and DirecTV expect the deal to close within 12 months. Under the terms announced Sunday, DirecTV shareholders will receive $28.50 per share in cash and $66.50 per share in AT&T stock. The total transaction value is $67.1 billion, including DirecTV’s net debt.

Stephenson and DirecTV CEO Michael White both said the merger would allow the combined company to offer video over multiple screens, but acknowledged that deals with content providers to expand service on multiple platforms still need to be negotiated.

White said that, for example, DirecTV’s exclusive deal for its signature product, NFL Sunday Ticket, expires at the end of the coming season. He said he was “confident” the deal would be extended with the NFL on an exclusive, long-term basis, and noted that in the past, DirecTV has sold the football package directly to online platforms, such as to users of Sony’s PlayStation.

“This positions us well to compete in the 21st century,” White said. “I think our future is bright together in ways that make both of our companies stronger.”

Analysts have questioned the strategic benefits of a deal, particularly because it would give AT&T a larger presence in the mature market for pay TV.

Last year, pay TV subscribers in the U.S. fell for the first time, dipping 0.1 percent to 94.6 million, according to Leichtman Research Group.

While AT&T and DirecTV are doing better than cable companies at attracting TV subscribers, DirecTV’s growth in the U.S. has stalled while AT&T is growing the fastest of any TV provider.

DirecTV offers neither fixed-line or mobile Internet service, and its rights to airwave frequencies for satellite TV are not the kind that AT&T can use to improve its mobile phone network.

Still, Stephenson has talked exuberantly about how the growth of online video helps boost demand for its Internet and mobile services. Last month, AT&T entered a joint venture with the Chernin Group to invest in online video services.

DirecTV would continue to be based in El Segundo, California, following the merger, the companies said.

Business Writer Dee-Ann Durbin in Detroit contributed to this report.

J.W.

Why Are Young People Unhappy?

J.W.

Benjamin Studebaker

I’ve noticed an interesting article floating around the internet. The piece, entitled “Why Generation Y Yuppies Are Unhappy” sees rampant narcissism and self-entitlement as the source of young people’s unhappiness. Does it have a case? Let’s take a look.

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Libertarianism: An Ecological Consideration

J.W.

appalachian son

golden-carpet-flora

Industrial Utility

In the vast arid lands of the Arckaringa Basin in Australia a major shale oil discovery has been made. Linc Energy has discovered across 16 million acres of land an estimated 133 – 233 billion barrels of shale oil lies in the regions lithology. No matter how much of this oil is recoverable using modern technology, this discovery is sure to be valued in the trillions at current market value. Peter Bond, chief executive of Linc Energy, is marketing a deposit that has the potential to transform the global oil industry. This is an incredible finding with incredible consequences.

Oil is a highly sought after commodity, and rightly so, as it currently fuels much of the developed worlds economy – along with other fossil resources such as coal. Investment in this new discovery will suit well for investors, there is a lot of money to be made and…

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Knock Knock! Guess Who? THE SEQUESTER!

this report comes courtesy of Reuters:

(Reuters) — Just as computers worldwide did not crash on January 1, 2000, in the “Y2K” scare and Earth itself did not shatter on December 21, 2012, as some interpreters of the Mayan calendar predicted, March 1, 2013, will not be remembered as the day the U.S. government disintegrated.

The Obama administration and even some Republicans are warning of mass government layoffs and services collapsing when “sequestration” begins in 10 days, unless a gridlocked U.S. Congress finds a way to circumvent the start of the $85 billion in federal budget cuts.

But what actually happens on March 1?

“Nothing. Nothing happens,” said a senior congressional aide who is keeping a close eye on the looming budget cuts.

While that might be somewhat of an exaggeration, the immediate impact is seen as minimal due to several safeguards, official and unofficial, that will keep the spending cuts from hitting Americans like a meat cleaver on March 1.

Senior administration officials on Tuesday had no concrete examples of what would immediately befall the country when the cuts begin. Ultimately, however, they would pare everything from military programs to space exploration between March 1 and the end of the fiscal year on September 30. Food inspections, air traffic control, law enforcement and education programs also would be among those hit.

“This moves forward on a rolling basis,” White House budget office controller Danny Werfel acknowledged last week after testifying to Congress, explaining that the full force of the $85 billion in cuts would not be felt immediately. But, he cautioned: “It’s very harmful as you go forward. On a seven-month time frame you’re going to see the effects relatively quickly.”

Senior administration officials said Republicans would be blamed for cuts that did come into force.

If allowed to run their course, the austerity measures could cost 750,000 jobs and keep weak economic growth stunted for the rest of 2013, the non-partisan Congressional Budget Office warns.

These spending cuts, decided in 2011 amid a fever in Congress for deficit reduction, were meant to be so painful that they would goad Republicans and Democrats into reaching an alternative agreement on where to cut back. The cuts “will visit hardship on a whole lot of people,” President Barack Obama warned on Tuesday.

Obama & The Fiscal Cliff

And they are only the first installment in a decade’s worth of required cuts totaling $1.2 trillion.

While some furlough notices will be issued to government workers, there will be few outward signs on March 1 that the cuts have been launched.

Under the law, retirees are shielded and so their Social Security checks will arrive on schedule at the beginning of March and every month thereafter. Similarly, the elderly and the disabled will not see their federally backed Medicare healthcare curtailed at all over the seven months.

Every U.S. soldier will get paid and the Defense Department will be allowed to shift funds to ensure that combat operations and “critical military readiness capabilities” are not degraded, according to the Obama administration.

Unofficially, many members of Congress are betting that a few weeks into the automatic spending cuts, Democratic and Republican leaders will get serious about negotiating a replacement to the sequestration and the $85 billion in spending cuts will not have had time to really bite.

LAYOFF NOTICES

And so on March 1 and in the days immediately after, while no dramatic shakeup is anticipated, there will be some early tremors.

* Government agencies are likely to issue 30-day warnings of impending furloughs of government workers. They could be told that starting on April 1 they will have to stay home for a maximum of 22 days between March 1 and September 30.

* New government contracts could slow in anticipation of no deal being reached to replace the sequestration. This would hit defense contractors and road and bridge builders alike.

* Members of Congress, who are not exempt from the spending cuts, will be advised to begin preparing their staffs for either salary cuts or layoffs if they have to shave funds from their approximately $4 billion in annual appropriations.

* Medical research labs at universities that rely heavily on federal funds will begin deciding which projects to abandon or curtail, if they haven’t already.

* Every federal agency will have to finalize their plans on how to execute the across-the-board spending cuts.

At this stage, most planned furloughs are being held to 22 days per federal employee. Anything longer is considered a formal layoff and requires more complex legal hurdles, some involving seniority, to be met.

In some cases, furlough notices won’t go out until terms are negotiated with employee unions after March 1. Not all union-government contracts cover such actions, said Carl Goldman, executive director of AFSCME Council 26, which represents 8,500 federal workers from building engineers to librarians.

“The biggest thing we can do is to negotiate over the scheduling of furloughs, how much choice employees will have in selecting days furloughed,” Goldman said.

Over the seven-month period, a 22-day furlough would roughly equal about one day per week, reducing workers’ income by about one-fifth.

LAID-BACK CONGRESS

Congress, showing little sense of urgency, is now on a week-long “Presidents Day” recess.

When members of the Senate and House of Representatives return next week, they will begin feeling each other out for a remedy by March 27, when another budget deadline hits: the need to replenish federal funds for all government agencies.

That is a separate fight in Congress but it might become mixed in with the sequestration battle as fiscal issues come to a head.

Last week, Senate Democrats unveiled their plan to replace the sequestration with a combination of agriculture subsidy cuts and higher taxes on the richest Americans.

Senate Republicans, warning that they will reject any new tax increases, have not yet settled on a plan. But several are circulating, including replacing the sequestration with different spending cuts, giving federal agencies more flexibility in how they would carry out the existing $85 billion in cuts, or reducing the federal workforce by 10 percent through attrition.

GOP 2013

Before going forward with any plan, Republicans might have to quell an uprising within their party that has some conservatives hoping that the meat-ax approach stays, thus ensuring some serious deficit reduction this year.

(Reporting by Richard Cowan and David Lawder; Editing by Alistair Bell and Eric Beech)

Jackson Williams.