AT&T Inc. will divest its DirecTV operations in a deal with private equity firm TPG that values the business at about $16 billion. That’s a fraction of the $48 billion the telecom paid for the satellite-TV company in 2015, reports Bloomberg.
The deal will help pay for AT&T’s 5G wireless expansion, including the more than $23 billion worth of spectrum the company bid for 1,621 licenses in the FCC’s C-band auction.
The move caps years of AT&T deliberating over what to do with DirecTV. The pay-television pioneer had increasingly become a burden as it lost almost nine million TV subscribers — or more than a third of the 25.4 million customers it had six years ago. Cord-cutting took hold soon after the purchase, with customers ending their pay-TV packages in favor of streaming services.
CEO John Stankey said the transaction “aligns with the future of our business.” But he also acknowledged: “We certainly didn’t expect this outcome when we closed the DirecTV acquisition in 2015,” according to Seeking Alpha.
As part of the agreement, a joint venture with TPG will run DirecTV and AT&T’s other pay-TV operations, the companies said Thursday. AT&T will get $7.6 billion in cash from the transaction, with the new DirecTV taking on $5.8 billion in committed debt financing.
TPG is acquiring a 30 percent stake in the business, leaving AT&T with 70 percent of the new entity. A key benefit for the telecom will be the removal of DirecTV from its books.
With the sale, AT&T is taking a big step toward becoming a smaller, modern communications and media company, notes Bloomberg. It also helps the carrier balance competing cash demands. AT&T is directing funds into its 5G network, film and TV programming production and dividends of almost $15 billion a year. It’s also paying interest on nearly $154 billion in long-term debt.
The board of the new DirecTV will have two representatives apiece from AT&T and TPG, as well as a fifth seat for the chief executive officer. Bill Morrow, currently CEO of AT&T’s U.S. video unit, is expected to take that role when the transaction is completed.
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