Why AT&T Might Not Sell DIRECTV

12 comments

News Analysis
Last week’s Fox Business report that “bankers” are saying AT&T needs to sell DIRECTV because it’s an ‘underperforming asset’ certainly rings true.

Since AT&T purchased DIRECTV in 2015 for $49 billion, the nation’s top satellite TV service has lost roughly five million subscribers. Making matters worse, the customer defections are dramatically increasing with each financial quarter.

In this year’s first quarter, DIRECTV and U-verse combined for a net loss of 897,000 subs. (AT&T does not break out the numbers for the two services, but DIRECTV’s losses are likely to be far greater than U-verse.)

“I don’t know if AT&T will go for it, but they may not have much choice,” said Fox Business’ Charlie Gasparino, who penned the report. “AT&T is coming under tremendous shareholder pressure to cut costs…They have a very underperforming asset known as DIRECTV that’s losing subscribers left and right. They have to figure out a way to get it off its balance sheet.”

That is all true. But there is one reason why AT&T might not sell DIRECTV. And it’s not because AT&T still sees value in the satcaster, which company executives suggest in half-hearted declarations to shareholders and financial analysts.

No, the real reason why AT&T might not sell DIRECTV is that no one might want to buy it.

The satellite TV industry, which dominated the pay TV category less than 10 years ago, is in freefall. Dish, DIRECTV’s longtime rival, has lost approximately 30 percent of its satellite subscribers over the last five years. That means the two satcasters have combined for a net loss of around nine million customers since 2015.

And with cord-cutting increasing, and streaming exploding, there’s no indication that the losses will stop, or even slow to a manageable rate.

Under this scenario, there’s little incentive for a company such as Apple, Google or Amazon to pay AT&T anything but dimes on the dollar for DIRECTV. And if AT&T can’t walk away with at least a face-saving return for the satellite service, why sell other than to get rid of a headache?

Of course, there is one company that could benefit from buying DIRECTV.

Dish.

In this article, I outline the reasons why Dish might want to purchase DIRECTV, which include the capacity to streamline operations, and pressure programmers for better rates.

But the path to a DIRECTV-Dish deal is fraught with obstacles, chiefly among them,  Charlie Ergen, Dish’s chairman and co-founder.

Ergen is arguably the industry’s most contentious (and possibly shrewdest) negotiator. Over the years, he has blown up deals shortly before pens meet paper with demands so outrageous that executives still shake their heads thinking about them. In fact, Dish has had merger talks with DIRECTV several times in the past only to see them go awry because the two companies butt heads.

(Dish and DIRECTV did agree to merge once nearly two decades ago, but the FCC nixed the deal on grounds that it would be anti-competitive.)

There’s no way that Ergen would buy DIRECTV other than on his terms. He knows that AT&T is desperate and he would use that to maximum advantage in negotiations.

AT&T understand this as well so the pressure to sell would have to be so enormous that it would bend to Ergen’s demands, at least some of them. Even if Ergen knows that buying DIRECTV could give Dish a lifeline for years to come, his zeal to get a great deal would likely force him to play hardball in talks. And if AT&T didn’t play along, Ergen would walk.

For a Dish-DIRECTV deal to conclude, it says here that both AT&T and Ergen would have to make compromises that they are not accustomed to make.

And that’s why AT&T might not sell DIRECTV.

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12 comments on “Why AT&T Might Not Sell DIRECTV”

  1. We know Charlie has the last word for Dish… Who is the person that has last word (yay or nay) for AT&T, DirecTV?

    1. I believe they are so DISORGANIZED.
      There is NO ONE.

      Maybe the “LAST CUSTOMER”
      He/she can just say: “I TOLD YOU SO”

      1. I lose internet FAR more often than I do DirectTV, so
        Even though DirecTV costs too much, I’ll keep it.

  2. The biggest impediment to a Dish/Direct deal isn’t Ergen, who would be ecstatic to get rid of a major competitor. The SEC would never approve the merger as long both are profitable.

  3. AT&T is the reason Direct TV is messed up. Customer service is horrible after AT&T bought them. U verse is horrible too from friends who had it. Customer service is important and they seem to not care one bit.

  4. Before AT&T acquired DirecTV, DirecTV had great service. Once AT&T came into the picture, everything started downhill. When I changed to DirecTV from Dish, everything was better, and continued to get better. Then along comes AT&T, and everything went downhill.

  5. The reason direct lost subscribers is because at&t forced subscribers to quit. Converting the directv Crm system into at&t was a big mistake. At&t doesn’t care about customers like directv did.

    1. You’re so right! We’ve had DirecTV since it was “PrimeStar”, living out in rural area without cable. We liked DirecTV, even had local repair people working for DirecTV. Since AT&T took over, it’s been price hikes, “must purchase” new equipment (we had 6 boxes – now down to 3, after buying 3 new smart TVs that run only roku) 90-minute phone calls just to set up the appointment to get new must-have equipment installed. AT&T website is difficult to navigate even with a simple question.
      AT&T shoulda stuck to telephones! Oh, never mind, they’re the reason after 40 years of landline service we canceled it!

  6. I have not been happy since AT&T took over. They outsourced technical / customer support and it became a real hassle when it came to having competent people assist me. I have been a subscriber for over 20 yrs. Direct TV was great to deal with until AT&T came into the picture.

  7. Hated it……. price gouged me til I finally said “ENOUGH”….. I will never have Direct/ATT again. I love DISH

    1. I switched from DTV because of horrible customer service and obsolete hardware equipment. I went back to Dish and am very happy.

  8. I been with Directv for 12 years I loved Directv the price’s was great but I hate At&T so I hope the sell it back prices are so high they always asking me to switch to

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