AT&T completed the DirecTV spinoff after six years of mismanagement in which nearly 10 million customers abandoned the company’s pay-TV services.

AT&T bought DirecTV for $ 49 billion ($ 67 billion including debt) in July 2015, although DirecTV and other traditional television services were already lose subscribers facing competition from online streaming. Customer losses were inevitable, but DirecTV’s losses under AT&T ownership were far beyond anything the other major television providers have experienced.

AT&T revealed the spin-off plan in February and announced the conclusion of the agreement yesterday. AT&T has partnered with private equity firm TPG to create a new company called DirecTV, which “will own and operate the DirecTV, AT&T TV and U-verse video services previously owned and operated by AT&T,” the announcement said.

AT&T will no longer run DirecTV, possibly allowing it to succeed under better management. But AT&T will own 70 percent of the shares in the new company, with TPG holding the remaining 30 percent. AT&T will receive $ 7.1 billion in cash to help pay off its debt, which consists of $ 160.7 billion long-term debt and $ 19.5 billion in debt maturing within one year. TPG paid $ 1.8 billion for its 30% stake.

Massive losses of AT&T customers

In just over four years, AT&T has lost more than 9.5 million customers from its Premium TV services division, which includes DirecTV satellite, U-verse wired video and the new AT&T TV online service. The category has changed from more than 25 million subscribers in Q1 2017 to 15.4 million midway through 2021. AT&T continuously increased prices and promotional offers eliminated because the company was looking for a higher average revenue per customer, but fell from first place To the third in total of television subscribers.

DirecTV’s value declined rapidly under AT&T leadership as the company reported a Depreciation charge of $ 15.5 billion in January 2021. AT&T last month noted the DirecTV / TPG deal will reduce AT & T’s expected revenue for the remainder of 2021 by $ 9 billion. The deal with DirecTV will also reduce AT & T’s expected EBITDA (earnings before interest, taxes, depreciation and amortization) by $ 1 billion.

AT&T also unloads Time Warner

AT&T runs WarnerMedia separately, as indicated previously, admitting the failure of his other giant merger. AT&T bought Time Warner for $ 85 billion ($ 109 billion including debt) in 2018 and now has an agreement underway to combine the assets of WarnerMedia and Discovery into a “standalone global entertainment company.” AT&T expects to receive $ 43 billion in the transaction while divesting ownership of the media division. AT&T shareholders are expected to receive shares in 71% of the new media company, while Discovery shareholders would own the remaining 29%. This agreement is expected to be concluded in mid-2022.

AT&T noted yesterday that the DirecTV transaction did not include “WarnerMedia’s HBO Max streaming platform and regional sports networks, both of which are part of the pending WarnerMedia-Discovery transaction; Vrio (video operations of AT&T in Latin America, which are sold to Grupo Werthein); U-verse network assets; and AT & T’s investment in Sky Mexico. DirecTV will continue to offer HBO Max to subscribers as well as all wireless or broadband services bundles and associated customer discounts.

DirecTV and AT&T will focus separately on their strengths

In his first announcement after the spin-off, stand-alone company DirecTV said the new operating structure would work better than the one managed by AT&T. “This is a watershed moment for DirecTV as we return to a singular focus on delivering a stellar video experience,” said DirecTV CEO Bill Morrow. (The LinkedIn of tomorrow profile says he “is known for his global expertise in leading complex turnarounds and capital-intensive start-ups.”)

The AT&T TV streaming service is renamed DirecTV Stream. Existing customers don’t have to make any changes to their streaming or satellite plans if they don’t want to. “It is important to note that as part of the agreement, AT&T satellite, streaming or IP video customers will automatically keep their video service, all wireless, Internet or HBO Max services bundled and associated discounts without any action required. “said DirecTV. .

After the WarnerMedia spin-off, AT&T CEO John Stankey will have significantly reshaped the company he succeeded former CEO Randall Stephenson, who led the two major mergers with the aim of turning AT&T into a media giant. Stankey has noted telecom company to return to core area of ​​expertise, becoming “one of the best capitalized broadband companies focused on investing in 5G and fiber to meet substantial and long-term demand for connectivity “.


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