AT&T looks to DirecTV deal to spur latest transformation

DALLAS

By midyear, the company expects to receive regulatory approval to acquire satellite video provider DirecTV, a deal valued at $67 billion including debt. When the deal is final, AT&T will have new services to sell and new geographic markets, all with an increased focus on business customers.

"This is our first acquisition with a whole new product set," chief financial officer John Stephens said during an interview at company headquarters in downtown Dallas.

With $132 billion in revenue last year, AT&T already ranks among the three dozen largest companies on the planet, according to Fortune magazine.

Counting DirecTV, which had $33 billion in revenue last year, as well as acquired and yet-to-be-acquired Mexican wireless operations, AT&T's annualized revenue should approach $180 billion. That would put it among the biggest 15 or so companies in the world, and the top five or six in the U.S. Something on the order of $8 billion annually will come from Latin American video and wireless operations, a review of records shows.

AT&T has closed its acquisition of Mexico's Iusacell. A deal for Nextel Mexico is pending. The Mexican wireless companies will be part of what AT&T calls a North American mobile service area.

DirecTV has about 20 million subscribers in the United States and 19 million in Latin America. AT&T has about 6 million video subscribers through its U-verse service.

"It's one of our fastest-growing areas simply because of untapped potential," said Ralph de la Vega, head of AT&T Mobile & Business Solutions, a group formed last August. Wireless business-related revenue grew 10.9 percent in 2014 over the previous year, AT&T reported. Overall business-related revenue grew 4 percent.

AT&T says it has more than 3.5 million business customers in 100 countries, including all of the Fortune 1000 ­companies.

"This is a new AT&T," said Steve McGaw, the chief marketing officer for the business solutions group. "We really are transforming."

More and more, de la Vega said, mobile software and centralized data storage technology — the cloud — are changing the way business is done. Companies want secure access to everything on every device their employees use — smartphones, tablets, laptops and desktops. And in every environment, wireless and wired.

Last September, Shell, the global energy company, signed an agreement with AT&T that will eventually enable 150,000 Shell employees and contractors in more than 50 countries to communicate more easily by voice, video and instant message.

The current incarnation of AT&T traces itself to Southwestern Bell, one of the seven "Baby Bells" that the old AT&T was forced to divest in 1984. Before then, AT&T was called "The Biggest Company on Earth" in a book by Sonny Kleinfield.

Over the years, Southwestern Bell changed its name to SBC Communications and acquired three other Baby Bells (Pacific Telesis, Ameritech and BellSouth) as well as various wireless operations. In 2005, SBC acquired its former parent, AT&T Corp., reclaiming the valuable brand name.

The new AT&T has been signaling its transformation for a while:

• It has become a major content creator as well as a carrier.

• It accelerated the modernization of its wireless and wired networks.

• It acquired Leap Wireless and its Cricket brand of no-contract, a usually less expensive mobile service.

• And it says it is becoming a leader in the Internet of things, connected devices that monitor — and sometimes control — everything from door locks at home to cars and jet engines. In 2014, AT&T said that it connected nearly 20 million different devices to its network.

If anyone missed those messages, CEO Randall Stephenson left no doubt in January.

By the end of this year, he told analysts, AT&T is going to be a "very different company."

For companies, the ability to change and adapt is essential as their products and services go through periods of growth and decline.