AT&T Again Exploring a Deal For DirecTV
By Drew FitzGerald, Cara Lombardo and Miriam Gottfried
AT&T Inc. is taking a fresh look its DirecTV business,
according to people familiar with the matter, exploring a deal for
a service wounded by cord-cutting.
The telecom and media giant and its advisers at Goldman Sachs
Group Inc. have been in talks with private-equity suitors about the
satellite TV unit, some of the people said. Potential bidders
include Apollo Global Management Inc., which had expressed interest
last year, and Platinum Equity, these people said.
The process is at an early stage, and it's not clear what form
any deal would take -- or if there will be one at all. It is
possible some of the suitors will team up or submit joint
proposals. Other investors that were approached have decided not to
pursue bids, some of the people said.
AT&T executives have previously explored parting with
DirecTV assets, including a potential spinoff or combining assets
with rival Dish Network Corp., but obstacles, including antitrust
concerns, have gotten in the way.
Any deal for the satellite TV service would be sizable, but
likely a far cry from the $49 billion AT&T paid for it in 2015.
The pay-TV unit has lost millions of subscribers in recent years as
viewers switch to on-demand entertainment services like Netflix
Inc. A deal could value the business below $20 billion, some of the
If a deal is reached, it would start to streamline a company
that used a series of acquisitions in the last decade to shift from
a phone service provider into a media conglomerate. It also left
the enlarged AT&T with roughly $180 billion of net debt.
The purchase of DirecTV made AT&T the biggest U.S. pay-TV
provider, a title it later ceded to Comcast Corp. as satellite
customers canceled. In 2018, a roughly $80 billion takeover of Time
Warner added HBO, the Warner Bros. film studio and cable channels
like CNN to AT&T's portfolio.
The latest deal talks were spurred by Chief Executive John
Stankey, an AT&T veteran who took the corner office in July
from longtime boss Randall Stephenson, who remains chairman. Mr.
Stankey has said the company should sharpen its focus on core
Cellphone service and wired broadband remain AT&T's biggest
profit engines and account for more than half of the company's over
$180 billion of annual revenue. Those telecom units have played a
key role stabilizing overall earnings this year as the coronavirus
pandemic drained revenue in its satellite arm and in its
AT&T shares have missed out on the stock market's recent
rally. The shares are down more than 20% year-to-date, compared
with a roughly 8% advance in the S&P 500 index.
The talks aren't certain to yield a sale, and the structure of
any deal could result in AT&T retaining a stake in DirecTV. The
Dallas company has tested market interest in several pieces of its
empire only to decide to keep the units in-house. The company
recently paused a sale process for its Warner Bros. Interactive
Entertainment videogame unit, according to a person familiar with
Shedding a majority of the shrinking pay-TV business could offer
a cash boost, while also triggering a costly write-down for
AT&T. Cord-cutting has caused the most damage at AT&T,
which shed 7 million U.S. video connections over the past two
years. AT&T doesn't break out revenue or profits for
Executives say the customer-loss trend is exacerbated by the
pandemic. Many bars, hotels and airlines that use satellite feeds
are operating at diminished capacity -- if at all -- sapping more
of the unit's revenue.
The company could still retain pay-TV customers if it decides to
drop the satellite infrastructure. Executives earlier this year
launched a service called AT&T TV, which delivers DirecTV
channels over the internet through a cable box that customers
"To the extent that we're able to get those customers engaged
with us on those platforms, then we're in a good place and we're OK
with that," Mr. Stankey said in a July interview on CNBC. "And if
that takes us down a path that says satellite delivery is less
important, so be it."
Write to Drew FitzGerald at email@example.com, Cara
Lombardo at firstname.lastname@example.org and Miriam Gottfried at
(END) Dow Jones Newswires
August 28, 2020 16:22 ET (20:22 GMT)
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