(Reuters) - AT&T Inc has approached DirecTV 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 if it completes its purchase of Time Warner Cable Inc .
DirectTV is the nation's second largest pay TV provider after Comcast and is followed by Dish Network . 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 , 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. (http://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. (http://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 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 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)