Buy high, sell low –
AT&T reportedly considers spinoff of DirecTV or combination with Dish.
AT&T is considering whether to “part ways” with DirecTV , just four years after buying the satellite company, the Wall Street Journalreported today. The Journal report doesn’t use the word “sale” to describe what AT&T is considering, but the end result could be AT&T no longer owning DirecTV.
“The telecom giant has considered various options, including a spinoff of DirecTV into a separate public company and a combination of DirecTV’s assets with Dish Network, its satellite-TV rival, “the Journal report said, citing” people familiar with the matter. “
It’s still early in the process, so AT&T could end up sticking with DirecTV. “AT&T may ultimately decide to keep DirecTV in the fold. Despite the satellite service’s struggles, as consumers drop their TV connections, it still contributes a sizable volume of cash flow and customer accounts to its parent,” the Journal reported.
The cash generated by DirecTV is helping fuel other investments at AT&T and is helping the company pay down its “towering net debt load, which stood at more than $ 160 billion earlier this year, “the Journal report said. AT & T’s $ 49 billion purchase of DirecTV contributed to that debt load.
A spinoff of DirecTV likely would not happen “until mid – 2020 at the earliest “for tax reasons, the Journal report said.
We contacted AT&T and will update this story if we get a response.
TV business in rapid decline
AT&Tcompleted the purchase of DirecTVin July 2015, with high hopes of dominating the pay-TV business using both DirecTV satellite and a new online service based on DirecTV. But AT & T’s total number of video subscribers dropped from 25 .4 million in Q2 2018 to 22 .9 million in Q2 2019, andAT&T told investorslast week that it expects to lose another 1.1 million TV customers in the third quarter.
Since April, AT&T has beenfacing a class-action lawsuitalleging that it lied to investors in order to hide the failure of its DirecTV Now streaming TV service. Last week, thelawsuit was updatedto include allegations that AT&T supervisors encouraged sales reps to create fake DirecTV Now accounts and sign AT&T customers up for DirecTV Now “without the customer knowing.”
AT & T’s TV strategy was criticized in an open letter last week by activist investor Elliott Management Corp., which has a $ 3.2 billion stake in AT&T. ElliotturgedAT&T to consider divesting DirecTV, which may have contributed to AT&T examining whether to offload the TV division.
AT&T also bought Time Warner Inc. in 2018 and is hoping to get a big chunk of the streaming business withnext year launch of HBO Max. But Elliott said that “AT&T has yet to articulate a clear strategic rationale for why AT&T needs to own Time Warner.”
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