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Will AT&T Close Satellite TV for Video Streaming Service?

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According to a recent Bloomberg report, U.S. telecom behemoth AT&T Inc. (T - Free Report) will wind down its DIRECTV satellite TV services in a phased manner within the next 3 to 5 years.

Notably, after acquiring DIRECTV, the largest satellite TV service provider in the U.S., AT&T is driving its new TV customers to DIRECTV’s offerings instead of its own U-verse TV service. Although the company is supporting its existing U-verse IPTV subscribers, it is not clear how long AT&T will continue with fiber-based TV offering. The Bloomberg report has indicated that the company has been planning to discontinue even its satellite TV services.

Going ahead, AT&T has already hinted that its upcoming “DIRECTV Now”, over-the-top (OTT) Internet TV service, which will offer video streaming facilities, will be its next-generation video platform. Leading telecom and TV operators such as Verizon Communications Inc. (VZ - Free Report) , DISH Network Corp. (DISH - Free Report) and Comcast Corp. (CMCSA - Free Report) have already launched their TV streaming services.

In Mar 2016, AT&T announced plans to offer a version of its DIRECTV satellite TV service through the Internet, which would not require customers to have a satellite dish, set-top box or annual contract. The company will be offering three affordable video plans in order to appeal to all types of viewers, ranging from those who want the full package to a streamlined bundle.

With DIRECTV Now, the company plans to offer a full range of live channels and on-demand shows. DIRECTV mobile version will be providing a package of premium and made-for-the-Web video service, particularly intended for smartphone users.

Recently, AT&T announced that the company will also abolish its U-verse broadband and voice brands. Existing subscribers of 45 Mbps broadband plan will now receive the service referred to as "AT&T Internet" and the tier named AT&T "internet 45." Similarly, the U-verse voice service will be renamed as "AT&T Phone." Notably, customers will get Internet speed, voice plans and prices similar to that of U-verse.

In the future, even the DIRECTV brand will be renamed as “AT&T Entertainment”, symbolizing the company’s transition to a single entertainment portfolio. However, this transition will not happen until AT&T launches its next-generation Internet TV service, which offers video streaming.

In the second quarter of 2016, AT&T gained 342,000 satellite TV subscribers but lost 391,000 fiber-based U-verse TV subscribers. The company is strategically shifting its TV U-verse customers to the DIRECTV brand. This move will free up very important bandwidth on its fiber-optic network, which AT&T can utilize to offer higher data transmission speeds to its high-speed broadband users. AT&T currently has about 20.5 million DIRECTV connections and about 4.8 million U-Verse connections.

AT&T currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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