DirecTV to Become Independent Company Through AT&T and TPG Agreement

AT&T has recently announced a definitive agreement with the private equity firm TPG. This agreement will result in DirecTV operating as a separate, standalone company.

Despite this change, AT&T will retain a majority ownership stake. Specifically, AT&T will hold 70% of the new company, while TPG will own the remaining 30%.

Valuation and Historical Context

The transaction establishes a valuation of $16.25 billion for DirecTV. This represents a significant decrease compared to the $48.5 billion AT&T initially paid to acquire the pay TV provider back in 2015.

This acquisition was part of a larger trend of consolidation within the telecommunications and media sectors. Notably, Verizon acquired TechCrunch through its purchase of AOL.

Pay TV Subscription Trends

Even with the inclusion of new services like AT&T TV, the number of pay TV subscribers continues to decline. AT&T reported a net loss of 617,000 premium video subscribers in its latest quarterly report.

However, AT&T emphasizes that subscriber losses have peaked in 2019. Furthermore, they highlight five consecutive quarters of sequential improvement in premium video net losses.

Focus on Streaming Services

AT&T’s larger acquisition of Time Warner (now WarnerMedia) indicates a shift in focus. The company’s television ambitions are now largely centered around its streaming platform, HBO Max.

Statements from AT&T Leadership

AT&T CEO John Stankey stated that creating a new entity with TPG will provide the necessary flexibility and dedicated management. This will allow the company to continue serving its customer base and maintaining profitability.

He further added that TPG is the ideal partner for this transaction and that structuring the video business in this way will maximize value creation.

Transaction Details and Timeline

The transaction is anticipated to be completed during the second half of 2021. The newly formed entity will provide AT&T with $7.8 billion, which will be used to reduce the telecom’s debt.

Upon completion of the deal, Bill Morrow, currently the CEO of AT&T’s U.S. video unit, will assume the role of CEO for DirecTV.

Reports from The Wall Street Journal last year indicated that AT&T was actively exploring potential deals involving DirecTV.