AT&T Inc. (T)'s Latin America Business Is Growing Faster

In this article, let's take a look at DIRECTV (DTV), a $47.18 billion market cap company, which is engaged in providing digital television entertainment in the U.S. and Latin America.

A Beneficial Deal

DIRECTV has been acquired by AT&T Inc. (T), which is the largest U.S. telecom company by market capitalization with $199.17 billion followed by Verizon Communications (VZ).

With the merger, AT&T occupies the first place in pay-TV subscriber base in the US: AT&T had 6 million and DIRECTV had 20.3 million.

This means that AT&T will have more power when negotiating with media networks for content costs.

Latin America is DIRECTV's second largest segment with $1.7 billion in revenue during the second quarter and almost 13 million subscribers at the end of the three-month period. However, competition is high, principally in Brazil, where the presence of rivals limits the ability to grow at higher returns. Also, in Venezuela the company faces a major risk, due to its political instability. However, we believe Latin American regions should contribute in a positive way in the future, because of the increase in the consumption of television services. For example, Mexico is one country with huge potential and AT&T could reach a good growth rate.

Although we don't know the benefits of the deal yet, I believe AT&T's has a strong capability to success in an industry that is somewhat saturated.

Hedge Fund Activity

Hedge fund gurus have also been active in DIRECTV in the second quarter of 2015. At the end of the second quarter, Warren Buffett is the major shareholder of the company. He held 31.35 million shares, valued at $2.91 billion, and the stake comprises 2.71% of the total portfolio.

Eric Mindich and Ken Fisher have initiated a new position in the stock with 4,481,762 and 2,194 shares, respectively. Paul Tudor Jones was extremely bullish, increasing the stake by 9040.94% to 503,300 shares. Other bullish moves were taken by Jeff Auxier, George Soros and David Abrams, as well as RS Investment Management.

On the bear side, we found that David Dreman, Ken Fisher, Lou Simpson, Wallace Weitz and Ronald Muhlenkamp sold out the stock in the second quarter.

Published on Sep 9, 2015
By Omar Venerio
Capital Markets, Derivatives and Financial Management Professor, Master in Finance and CFA candidate. I am an independent trader of stocks and options and passionate about the stock market.

Copyrighted 2020. Content published with author's permission.

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