AT&T Inc. closed its $49 billion acquisition of DirecTV after more than a year of regulatory review, a combination that creates the largest U.S. pay-television company.

For AT&T, the deal is the keystone in its effort to diversify away from the U.S. wireless business, where growth has slowed as market saturation and competition take their toll. DirecTV, which AT&T has said it is considering renaming, will give the carrier more scale in television and provide leverage to offer new video services over-the-top and on mobile devices.

"We're now a fundamentally different company," AT&T Chief Executive Randall Stephenson in a news release. The company said it would provide updated financial guidance in coming weeks.

The company said Chief Strategy Officer John Stankey will be chief executive of a new division called AT&T Entertainment & Internet Services, which includes DirecTV and the division that also includes AT&T's broadband and video business. DirecTV Chief Executive Mike White plans to retire.

The deal went through a rigorous review after it was announced in May 2014, a period which included strong regulatory opposition to consolidation efforts. Comcast Corp.'s $45 billion deal for Time Warner Cable Inc. was killed and regulators warned against Sprint Corp.'s attempt to merge with T-Mobile US Inc.

The Federal Communications Commission approved the deal Friday but attached several conditions including requiring AT&T to expand its fiber-optic broadband service and offer stand-alone broadband service at set prices to low-income individuals who meet certain criteria. The carrier also will be required to apply any broadband-data caps it imposes on customers to its own over-the-top video service and content to eliminate any chance that it can take advantage of rivals.

"The conditions also ensure that the benefits of the merger will be realized," the FCC said in a statement.

Public advocacy organization such as Public Knowledge and Free Press criticized the conditions as too weak, warning the deal would harm competition in the over-the-top video market.

During the review, critics of the deal, including Netflix and Dish Network Corp., made similar claims that the combined company would have the ability and incentive to protect its traditional television business and squeeze online video rivals.

Regulators have signaled they are more worried about providing choice in Internet access and new, online video options than they are about concentration in the declining pay TV business.

Write to Thomas Gryta at thomas.gryta@wsj.com

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