AT&T launches DirecTV as a $ 16 billion company, a quarter of what it paid in 2015

AT&T today announced its intention to transform its various video businesses – DirecTV, AT&T TV and U-Verse – into a new company that it will jointly control with TPG Capital. The deal sees AT&T retain a 70% stake in the company, with TPG getting the other 30. “The transaction to separate AT & T’s US video business into New DirecTV results in an enterprise value for the new company of $ 16.25 billion.”

AT&T paid a total of $ 67 billion to buy DirecTV: it landed at the satellite provider for $ 48.5 billion in 2014, and the rest was debt incurred by AT&T. With this “new high-end video entity” valued at less than a quarter of that amount, you can see how well the original mega-acquisition fared. “We certainly weren’t expecting this result when we closed the DirecTV acquisition in 2015,” AT&T John Stankey said on a call with analysts and investors after the news went public.

The deal for the new company, which will be led by Bill Morrow, AT & T’s US video director, is expected to close in the second half of 2021. AT&T will bring in $ 7.8 billion under the deal.

AT&T says all content offerings – including NFL Sunday Ticket – will transition to the “new” DirecTV. The company is also insisting that its WarnerMedia channels such as CNN, TBS and TNT will remain at the heart of video properties. “Customers won’t see a change” in bundles or short-term programming, Stankey said.

Activist investors have long urged AT&T to face its DirecTV problem; Elliott Management said the transaction produced “damaging results”. DirecTV’s business continued to suffer from declining subscriber numbers, with consumers turning to streaming entertainment en masse. But AT & T’s deeply confused branding choices for its video services haven’t helped matters.

“Today’s announcement reflects the evolution of our business,” Stankey said on the call. “We’re coming out of a year where we’ve seen strong growth in wireless subscribers,” Stankey said, and he also called HBO Max “an important part of our future”. AT&T said it was focusing on mobile business – it had just spent $ 23.4 billion on the FCC’s C-band spectrum auction – and content efforts like HBO Max.

Stankey added that AT&T has looked at “every opportunity under the sun” to find out what to do with its video assets before deciding on the TPG deal.