On the heels of Comcast’s deal to acquire Time Warner Cable and become the country’s biggest pay-TV provider, AT&T is considering acquiring satellite-TV company DirecTV, reported the Wall Street Journal.

Neither side is commenting, but sources told both the Journal and the Los Angeles Times exploratory talks are underway that would see the telecom giant acquire the satellite broadcaster for approximately $40 billion, which is DirecTV’s market cap. AT&T’s market cap is $185 billion.

Should the combination go through, AT&T would serve nearly 26 million households in the U.S., less than the 30 million that Comcast-Time Warner would serve, but still a sizable chunk of the nation’s pay-TV business.

An AT&T acquisition of DirecTV would solve problems for both companies: It would give AT&T a national pay-TV distribution system, while giving DirecTV the ability to offer high-speed Internet access to its customers. Not being able to directly provide Internet access has been hurting satellite-TV providers, against cable companies ability to offer customers the bundle of TV, phone service and high-speed Internet access.

READ MORE: Wall Street Journal, Los Angeles Times

Brief Take: An AT&T/DirecTV merger would create another behemoth pay-TV company, but the new company’s ability to offer cable-like bundles could expand pay-TV competition. That would increase chances the government would approve the deal, especially as the government looks to increase competition in the face of the pending Comcast-Time Warner Cable merger.

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