Last Friday, the Federal Communications Commission (FCC) approved the merger of satellite TV powerhouse DirecTV and wireless behemoth AT&T. The merger brings 20 million satellite TV customers under AT&T’s wing and expands AT&T’s TV footprint nationwide. The deal is likely to accelerate a number of significant trends already observed in the telecommunications industry, while also increasing possibilities beyond the U.S.

Nearly 25% of US Millennials said they have never had a landline phone

The Triple Play Bundle Evolves

The telecommunications industry has placed primary importance on service bundles because customers who subscribe to multiple services are usually more lucrative and they are less likely to switch to a different provider. The classic triple play bundle, which includes landline phone, internet, and pay-TV services, continues to be the most-promoted bundle in industry direct mail efforts. Steadily, however, the popularity of the landline home phone has decreased. According to Mintel’s Pay TV and Home Communication Service US 2015 report, 64% of US households have a landline phone, down from 71% in 2013. Millennials are driving this trend. Mintel’s Bundled Communications Services US 2013 found that nearly one in four Millennials said they have never had a landline phone subscription, compared to 12% of all adults. AT&T’s wireless service, paired with DirecTV’s satellite TV service and the broadband expansion that AT&T promised as part of the deal, could intensify the shift from a landline-based triple play bundle to a wireless-centric bundle.

Mobile TV Gains a Greater Foothold

By combining AT&T wireless with satellite TV service, AT&T strengthens its mobile TV position. DirecTV recently announced 90 out-of-home streaming channels available through DirecTV Everywhere. AT&T wireless customers who also subscribe to satellite TV service will be able to watch these 90 channels on their phones or tablets on-the-go, whether over WiFi or AT&T’s wireless network. For AT&T, this increases the likelihood that its customers who bundle satellite and wireless will consume much more wireless data each month.

With the acquisition of DirecTV, AT&T gains NFL Sunday Ticket, DirecTV’s exclusive NFL sports package. The service enables satellite subscribers to watch every NFL game on Sunday afternoon, including out-of-market teams. The package has been a key differentiator for DirecTV and was so important to the merger that AT&T reserved the right to abandon the deal if DirecTV was unable to renew its agreement with the NFL.

In 2014, DirecTV launched NFLSundayTicket.TV. This over-the-top version of NFL Sunday Ticket is available to non-satellite subscribers living in select buildings where satellite service is unavailable or at certain colleges or metro areas. Now, however, AT&T could make NFLSundayTicket.TV available to more non-satellite subscribers by promoting it as a stand-alone service to wireless customers, or bundling it with wireless to entice new customers. By positioning NFLSundayTicket.TV this way, AT&T could significantly drive up the rate of TV everywhere adoption; Adobe reports that there are more than three times as many TV everywhere viewers watching sports than those watching movies.

Latin America Offers New Potential for Transnational Services

DirecTV had already developed a significant presence in Latin America, with over 17 million customers. AT&T recently bolstered its own Latin American footprint by buying up assets in Mexico, starting with its November acquisition of Iusacell, followed by the purchase of Nextel Mexico. These two deals resulted in over 12 million new subscribers for AT&T. As a result, the telco has a stronger position to offer bundled services including satellite TV, wireless, and fixed-wireless Internet across Mexico, with opportunities to expand the wireless footprint further into Latin America. Not only does the merger improve AT&T’s North American presence, but it could also position AT&T to provide a greater breadth of service options to frequent travelers and businesses operating in both the US and Latin America. In fact, we might even see service plans extend across country borders to enable participants to join plans with friends and family living in different parts of the Americas.

While the addition of a nationwide satellite TV service offers clear advantages for AT&T, questions remain regarding AT&T’s U-verse and Digital Life markets, where services overlap between DirecTV and AT&T. For example, will satellite TV replace U-verse TV service in U-verse markets? Additionally, both companies provide their own home security product. AT&T could eliminate DirecTV’s relatively new LifeShield home security product in favor of scaling its Digital Life services. Or the provider may promote LifeShield as a supplement for the many markets not served by Digital Life. The potential impacts of the merger could echo into multiple industries. For now, however, it’s wait and see.

Emily Groch is Mintel Comperemedia’s Director of Insights, Telecommunications. She provides omni-channel marketing analysis and competitive insights to wireless, TV, internet, over-the-top, and home security service providers across the U.S. and Canada.

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