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(Reuters) - AT&T Inc (T.N) has approached DirecTV DTV.O about a possible purchase of the satellite TV company, the Wall Street Journal reported, citing people familiar with the situation.
A deal would likely be worth at least $40 billion, DirecTV's current market capitalization, the newspaper said.
A combination of AT&T and DirecTV would create a pay TV network that could rival Comcast Corp (CMCSA.O) if it completes its purchase of Time Warner Cable Inc TWC.N.
DirectTV is the nation's second largest pay TV provider after Comcast and is followed by Dish Network (DISH.O). However, it lags cable and phone companies in the broadband market.
Aggressive discounting to attract customers in a nearly saturated wireless market is taking a toll on carriers such as AT&T, forcing them to explore other areas for growth.
AT&T, the No. 2 U.S. mobile provider behind Verizon Communications Inc (VZ.N), is expanding its broadband and video services.
AT&T has held talks with both Dish Network and DirecTV in recent years, people familiar with the matter told the Journal. (r.reuters.com/qad98v)
AT&T and DirecTV have an agreement through which the companies offer a co-branded version of DirecTV's satellite television service across the 22 states where AT&T offers residential broadband and voice service. (r.reuters.com/vyd98v)
DirecTV also sells AT&T's broadband services, including AT&T U-verse High Speed Internet to existing DirecTV customers.
Dish Network Corp (DISH.O) has also approached DirecTV for a tie-up. There were reports in March that Dish Chief Executive Charlie Ergen contacted DirecTV CEO Mike White to discuss a possible deal.
Representatives for AT&T were not immediately available for comment. DirecTV spokesman Robert Mercer said the company does not comment on speculation.
Comcast Corp this week agreed to a three-way deal with Charter Communications Inc (CHTR.O) as part of Comcast's efforts to win regulatory approvals for its proposed $45 billion purchase of Time Warner Cable.
Reporting by Supriya Kurane and Soham Chatterjee in Bangalore; Editing by Edwina Gibbs and Saumyadeb Chakrabarty