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By Soyoung Kim and Liana B. Baker
NEW YORK May 17 (Reuters) - AT&T is close to announcing that it will buy the No. 1 U.S. satellite TV operator DirecTV, according to people familiar with the matter, in the second potentially transformative deal to jolt the U.S. television industry this year.
AT&T has been in active discussions to buy DirecTV for nearly $50 billion, or low to mid-$90s per share, and has been working to finalize a deal in coming weeks, Reuters reported last Monday.
The two companies agreed key terms of the proposed transaction and are expected to announce the agreement in days pending final approval from each company's board, one of the people said on Saturday, asking not to be named because the matter is not public.
The takeover would be the latest in a string of mega-acquisitions AT&T has considered, including an abortive bid for T-Mobile USA in 2011, as well as a potential takeover of Vodafone Plc, which receded as a possibility after Comcast Corp surprised the industry this year with a $45 billion bid for Time Warner Cable Inc.
A tie-up with DirecTV would expand AT&T's reach and allow it to bundle new services, and DirecTV would produce cash flows that could help support the company's dividend.
Goldman Sachs Group and Bank of America Merrill Lynch are advising DirecTV, while Lazard Ltd is advising AT&T, the people said.
A spokeswoman for AT&T declined to comment. A DirecTV spokesman did not immediately respond to a request for comment.
News of an imminent announcement was first reported by news website BuzzFeed, which said on Saturday that DirecTV Chief Executive Mike White told his senior executives a deal had been reached and would be announced on Sunday.
The deal would combine the largest U.S. satellite provider and the country's No. 2 wireless carrier, expanding AT&T's customer base by 20 million for its U-verse fiber product, which provides television and Internet service.
The transaction may also allow current DirecTV customers to get Internet service where AT&T u-Verse is available. DirecTV's growth has been hurt because unlike cable companies, it is unable to offer broadband alongside its TV subscriber services. AT&T has about 10.4 million u-Verse Internet customers in states such as California and Texas.
"AT&T just upped the ante," said Roger Entner, lead analyst at Recon Analytics, referring to the BuzzFeed report. "They have become an even more integrated telecom provider and are no longer tied to their U-Verse footprint."
FUTURE OF SATELLITE TV
The transaction raises questions on what DirecTV's rival No. 2 satellite TV operator Dish Network Corp, controlled by chairman Charlie Ergen, may do now that its larger rival, which is also a longtime speculated merger partner, is no longer available.
"It increases pressure on Charlie Ergen to do something," Enter said.
Yet many investors have questioned why AT&T, which is facing slowing growth, would buy DirecTV at a time when U.S. satellite TV subscriptions have flattened.
The growth of web-based television services could mean that demand for satellite slows further in the coming years.
AT&T shares have underperformed the S&P 500 index for the past three years. DirecTV shares have been up 75 percent over the same period. DirecTV's top holder was Warren Buffett's Berkshire Hathaway with 34 million shares, a 6.85 percent stake.
From the point of view of the regulators, the AT&T-DirecTV deal would likely enjoy a somewhat smoother ride than the Comcast-Time Warner Cable deal.
Still, the companies may face questions about the areas where their TV services now overlap and the potential for reduced competition there.
Gene Kimmelman, president of the public interest group Public Knowledge, said that any deal between AT&T and DirecTV would mean a loss of choice in video for about 25 percent of Americans but will allow the companies to compete more effectively with their more powerful rivals.
"This definitely has some competitive downside," he said. "I'm not sure this will raise as many fundamental dangers as the Comcast deal."
(Additional reporting by Nick Carey, Marina Lopes and Diane Bartz; Editing by Frances Kerry)
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