Tuesday, June 22

AT&T may keep majority ownership of DirecTV as it closes in on final deal


Enlarge / A DirecTV satellite dish seen outside a bar in Portland, Oregon, in October 2019.

AT&T is reportedly closing in on a deal to sell a stake in DirecTV to TPG, a private-equity firm.

Unfortunately for customers hoping that AT&T will relinquish control of DirecTV, a Reuters report on Friday said the pending deal would give TPG a “minority stake” in AT&T’s satellite-TV subsidiary. On the other hand, a private-equity firm looking to wring value out of a declining business wouldn’t necessarily be better for DirecTV customers than AT&T is.

It’s also possible that AT&T could cede operational control of DirecTV even if it remains the majority owner. CNBC in November reported on one proposed deal in which “AT&T would retain majority economic ownership of the [DirecTV and U-verse TV] businesses, and would maintain ownership of U-verse infrastructure, including plants and fiber,” while the buyer of a DirecTV stake “would control the pay-TV distribution operations and consolidate the business on its books.”

The latest talks between AT&T and TPG are “exclusive,” with other bidders out of the running for now, Reuters wrote last week, citing anonymous sources. “The advanced talks with TPG are the culmination of an auction that AT&T ran for DirecTV for several months,” the report said.

DirecTV lost most of its value under AT&T ownership

AT&T bought DirecTV in 2015 for $49 billion and has reportedly been unable to get bids valuing the TV provider at even half that amount. “The exact price TPG is willing to pay could not be learned, but sources said the deal could value DirecTV at more than $15 billion,” Reuters wrote, suggesting that the months-long auction didn’t raise the price much, if at all.

Bloomberg also reported that AT&T and TPG are in exclusive talks over DirecTV. “A potential deal is weeks away, and the talks could still fall apart… The agreement being discussed is highly structured and would include preferred stock,” Bloomberg wrote, citing an anonymous source.

TPG says it manages $85 billion in assets including investments in dozens of technology companies.

AT&T lost 8 million customers

AT&T has lost nearly 8 million customers since early 2017 from its Premium TV services, which includes DirecTV satellite, U-verse wireline video, and the newer AT&T TV online service. Total customers in that category decreased from over 25 million in early 2017 to 17.1 million at the end of September 2020.

While the industrywide shift from cable and satellite TV to online streaming has hurt the business, AT&T itself accelerated DirecTV’s customer losses by repeatedly raising prices and removing promotional offers. AT&T just raised TV prices again last week. AT&T is scheduled to report earnings—including the latest TV-customer figures—on Wednesday.



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