Reports say AT&T Inc. is in talks with DirecTV about buying the satellite broadcaster for $40 million.
A person with knowledge about the conversations, who also asked for anonymity, said that there is no guarantee that the deal will be made, according to Dallas Morning News.
The person added that the two companies have formed due diligence teams to review a potential purchase.
People familiar with the situation say that DirecTV's board is concerned with satellite TV's inability to offer an Internet-access broadband service that can compete with the service from cable and phone companies, The Wall Street Journal reported.
The Justice Department would have to evaluate the deal to judge its impact on competition, and the Federal Communications Commission would have to approve of the arrangement. AT&T and DirecTV would also have to prove to the FCC that the acquisition would be in the interest of the public, and that the combined company would have the ability to offer consumers benefits that would not be available without the merger.
A person familiar with the issue said the deal would have a good chance at being approved because of the success of video and voice service, and that it would help the merged company compete with Comcast, which is the leading provider of broadband and cable. The deal would make DirecTV's issue with broadband less of a dilemma, The Wall Street Journal reported.
The combination of AT&T and DirecTV would create a pay-TV company with about 26 million customers in the U.S., Dallas Morning News reported. AT&T's U-Verse has almost 6 million customers. DirecTV has over 20 million subscribers, along with 17 million in Latin America.
There have been rumors about DirecTV being a potential candidate for a merger, most of which point to rival broadcaster Dish Network as the company with which it would merge. The two companies attempted to link over 10 year ago, but the deal was not approved by regulators.
This merger would be more realistic, since AT&T and DirecTV already do business together, Variety reported.
Neither DirecTV nor AT&T commented on the reports of the deal.