By Malathi Nayak

NEW YORK (Reuters) - AT&T, which on Friday received final U.S. regulatory approval to buy DirecTV, will offer ad-supported TV streaming and mobile video products while building out its advertising technology, John Stankey, the AT&T executive named as chief of the company's Internet and Entertainment division, told Reuters.

Stankey, who was previously AT&T's chief strategy officer, will head a division that will craft over-the-top or TV streaming and mobile video products. He will also oversee the wireless distribution of mostly youth-oriented original content created by Otter Media, a joint venture of the telecom carrier and the investment group headed by media entrepreneur Peter Chernin.

"It's a two-pronged approach - it's great premium content and scale that DirecTV brings married with the innovative cutting edge, new models that the Chernin organization is focused on and bringing those two together so we can meet customers' needs over time," Stankey said.

AT&T's $48.5 billion deal to buy satellite TV company DirecTV Corp will create the No. 1 U.S. pay-TV company with over 26 million U.S. subscribers. The combined company is the second largest U.S. video subscription service after Netflix.

AT&T is looking for new revenue streams as the wireless market stagnates. Whether it can effectively compete in the online video market as players such as Netflix and Dish Network Corp and new entrants like Verizon Communications rush to service viewers who increasingly watch video on mobile devices remains to be seen.

AT&T will let DirecTV users stream linear TV content that they watch in their living rooms to their mobile devices even before they set up their satellite TV connection, in addition to offering new mobile video content services targeted at younger customers, according to Stankey.

He did not provide a timeline for the launch of Chernin's mobile video products but said revenue would come from ads, sponsored or free content and subscriptions.

ADVERTISING REVENUE

AT&T already has content rights to offer over 200 live TV channels such as ABC, Disney, ESPN and CNN that users can stream on mobile devices outside the home on its U-Verse broadband and TV service through an app.

While DirecTV has exclusive content deals such as the popular NFL Sunday Ticket and some wireless agreements in place, AT&T will negotiate to bring a U-Verse-like mobile viewing experience to DirecTV services, Stankey said.

"That amount of content will increase virtually every quarter and that’s going to be a constant drumbeat march that we’re going to be on," he said.

AT&T's bigger rival Verizon is gearing up to launch a mobile video service this summer with short-form content. In June, Verizon acquired AOL Inc, to access its ad technology and make a $4.4 billion bet that a push into mobile video and targeted advertising can help it find new growth avenues.

AT&T will move aggressively on the advertising side by creating ad tools within the company and partnering or acquiring advertising technology firms, Stankey said.

The combined company's ad revenue is currently $2 billion, Stankey said.

"We have high expectations that we are going to continue to grow that so we have a meaningful advertising business."

(Story refiles to add dropped words "going to" in quote in last paragraph.)

(Reporting by Malathi Nayak; Editing by Leslie Adler)