AT&T May Retain Majority Interest in DirecTV Upon Closing of Final Agreement

AT&T is reportedly in the process of closing a deal to sell a stake in DirecTV to TPG, a private equity firm.

Unfortunately for customers who are hoping AT&T will relinquish control of DirecTV, a Reuters report on Friday said the current deal would give TPG a “minority stake” in AT & T’s satellite television subsidiary. On the other hand, a private equity firm looking to extract value from a declining business might not necessarily be better for DirecTV customers than AT&T.

It is also possible that AT&T may cede operational control of DirecTV even though it remains the majority owner. CNBC reported in November on a proposed deal in which “AT&T would retain the economic majority of the [DirecTV and U-verse TV] and would retain ownership of the U-verse infrastructure, including factories and fiber, “while the purchaser 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 race for now, Reuters wrote last week, citing anonymous sources. “The advanced talks with TPG are the culmination of an auction that AT&T has been hosting for DirecTV for several months,” the report said.

DirecTV has lost most of its value under AT&T ownership

AT&T bought DirecTV in 2015 for $ 49 billion and was reportedly unable to secure offers valuing the TV provider at half that amount. “The exact price that TPG is willing to pay could not be learned, but sources said the deal could value DirecTV at over $ 15 billion,” Reuters wrote, suggesting that the auction of several months did not increase 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 talks could still crumble … The deal under discussion is very structured and would include preferred shares,” Bloomberg wrote, citing an anonymous source.

TPG claims to manage $ 85 billion in assets, including investments in dozens of tech companies.

AT&T lost 8 million customers

AT&T has lost nearly 8 million customers since early 2017 to its Premium TV services, which include DirecTV satellite, U-verse wired video, and the new AT&T TV online service. The total number of customers in this category grew from over 25 million at the start of 2017 to 17.1 million at the end of September 2020.

While the industry-wide move from cable and satellite TV to online streaming has hurt business, AT&T itself has accelerated the losses of DirecTV customers by repeatedly raising prices. and removing promotional offers. AT&T just hiked television prices last week. AT&T is due to release its earnings on Wednesday, including the latest figures for TV customers.