AT&T Offloads Minority Interest in the Failing DirecTV Enterprise
In a surprising twist, it seems AT&T has found a new lease of life for its troubled DirecTV business, partnering with private equity firm TPG.
Announcing the formation of a new company named New DirecTV, AT&T will hand over the reigns of its video services - DirecTV, U-verse, and AT&T TV (which recently absorbed AT&T TV Now) - to this new entity. Reports suggest this deal could be unveiled this week, valuing the new company at a whopping $16.25 billion. AT&T will have a 70% stake in this joint venture, with TPG owning the remaining 30%.
This $7.8 billion deal is expected to close in the latter half of 2021, with the cash generated being used to chip away at AT&T's massive debt mountain. It's unclear how this partnership will affect the existing services, but AT&T has assured that the newly established company will continue to provide a competitive video service filled with top-tier content.
John Stankey, AT&T chief, stated, "This move allows us to concentrate on our core connectivity business while maintaining a competitive video service." He also added, "We'll be focusing on growing our customer relationships across 5G wireless, fiber, and HBO Max."
One can't help but wonder if this session marks the beginning of a series of WarnerMedia streaming service fire sales, akin to the recent Crunchyroll sale.
According to sources, this strategic move by AT&T has significant implications for its financial health. Starting in 2025, DirecTV will no longer be a part of AT&T's free cash flow and adjusted earnings per share (EPS). This allows AT&T to focus on its strategic plan, emphasizing growth in 5G and fiber connections.
Moreover, the proceeds from this deal will aid AT&T in its mission to generate over $50 billion in financial capacity over the next three years. This includes strengthening its balance sheet and reducing debt. By 2025, AT&T aims to achieve a net leverage target of 2.5x net-debt-to-adjusted EBITDA. This goal is supported by the sale and other financial maneuvers, which will streamline the company's assets and improve its financial flexibility.
So, it seems this deal is more than just a sale; it's a strategic move aimed at reinventing AT&T's financial future and positioning themselves as leaders in the telecommunications market. It'll be interesting to see how this alters the landscape of the pay-TV industry. Stay tuned for updates!
- The tech landscape of the pay-TV industry might alter due to AT&T's strategic offer to sell its DirecTV business, partnering with TPG, which could potentially be the beginning of a series of streaming service sales, similar to the recent Crunchyroll sale.
- The future of AT&T's financial health appears to be reinvented by this strategic move, as the proceeds from the deal will contribute to their mission to generate over $50 billion in financial capacity over the next three years.
- By selling DirecTV, AT&T aims to achieve a net leverage target of 2.5x net-debt-to-adjusted EBITDA by 2025, strengthening its balance sheet and reducing debt, demonstrating a directv approach towards technology and debt management.
- In partnership with TPG, AT&T strategically established a new company named New DirecTV, which will focus on video services such as DirecTV, U-verse, and AT&T TV, while AT&T shifts its focus to its core connectivity business and growing customer relationships across 5G wireless, fiber, and HBO Max, signifying a strategic shift in their technology offerings.
