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from Breakingviews:

AT&T puts shareholders on hold for DirecTV

By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

AT&T is putting its shareholders on hold to buy DirecTV. Its $67 billion acquisition of the satellite TV operator announced on Sunday brings with it an unexpectedly robust $1.6 billion of cost savings. Even so, these don’t quite cover the cost of the premium. In any case, AT&T says it will use the money to roll out rural broadband service. Customers and regulators are getting the first call.

A little more than three years after AT&T launched an eventually torpedoed $39 billion bid for T-Mobile US, it has found another acquisition target big enough to match its ambitions. Instead of expanding in domestic cellular, though, the $190 billion company led by Randall Stephenson is aiming to marry video and broadband as the competitive landscape for television and internet service reshapes for the mobile and digital era.

The deal math suggests AT&T is paying over the odds for its quarry. The synergies AT&T expects from the deal, mainly from cheaper TV programming, amount to a present value of roughly $10 billion. The $95-a-share purchase price represents 30 percent more than where DirecTV stock was trading in late March before a news report indicated it might be bought. So the $11.2 billion premium exceeds the value of the savings.

In what looks like a bid to appease regulators, though, AT&T is pledging to use the money saved to provide high-speed internet service to 15 million locations mostly outside urban areas. Much of it will probably be fixed wireless, which is slower than fiber but also much cheaper to install.

from Breakingviews:

FCC needs thick skin to weather its moment in sun

By Daniel Indiviglio and Robert Cyran
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

The U.S. Federal Communications Commission will need thick skin to weather its moment in the sun. The usually low-profile telecom watchdog is tackling flashy issues involving mergers, internet neutrality and wireless spectrum. Resolving them won’t be easy, given the agency’s mandate to spark competition while also promoting efficiency and consumer choice. Current commissioners seem up to the challenge.

Chairman Tom Wheeler, a former lobbyist and telecommunications entrepreneur, leads the panel of three Democrats and two Republicans. Their experience as lawyers and legislative aides and with state regulation should help in navigating a long list of politically and technically difficult tasks.

Saving millions from spectrum sales

Diana Furchtgott-Roth-Debate– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. Any views expressed are her own. —

As President-elect Obama and his chief performance officer Nancy Killefer, formerly of McKinsey & Co., ponder how to make government more efficient, they could cast an eye on almost any federal agency and find savings for the American taxpayer.

One example is the Federal Communications Commission, which is failing to earn hundreds of millions of dollars annually for the taxpayers by undercharging for the private use of parts of the radio spectrum, notably the frequencies used for the links between cell phone towers and the integrated telephone network.

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