Q. I’ve enjoyed your articles on what might happen if AT&T sells DIRECTV. I hope they do. But let me ask you what will happen if they don’t sell DIRECTV? One of the articles in one of the papers said they might not sell, right? If so, then what? — Claire, Ventura, California.
Claire, you’re right. The New York Post reported last month that AT&T could abandon efforts to sell DIRECTV if current bidders did not increase their offers. (Equity firms Apollo Global Management and Churchill Capital have been cited as interested buyers.) The Post, and other publications, have written that the bids are around $15 billion, which seems short considering AT&T paid $49 billion for the satcaster in 2015. However, we don’t know the specifics of the bids, such as whether they are for a minority or majority stake.
I think AT&T will sell DIRECTV in the coming weeks; the company needs to eliminate debt and focus more on new streaming ventures, such as HBO Max. But it is possible that AT&T will decide not to sell for a variety of reasons, including the bid amount and whether the deal could pass muster with federal regulators. Fox Business has said Dish, DIRECTV’s longtime satellite rival, could be part of the purchase, which could be viewed as anti-competitive by the Justice Department and Federal Communications Commission. (If DIRECTV and Dish align, even as joint stakeholders, some rural residents who rely on satellite TV for multi-channel viewing could see their prices rise even further.)
So let’s examine what might happen if there is no deal.
I think you would see AT&T run DIRECTV the way it has been running U-verse for the last few years. It would provide reliable service for existing subscribers, but invest next to nothing in generating new ones. It might even effectively stop marketing DIRECTV to new customers, as it has done for U-verse. (AT&T’s communications department says it still sells U-verse to new customers, but its own web site says it’s not.)
AT&T believes satellite TV’s days are numbered so there would be little point in spending more on new technology and programming.
You might say AT&T is already neglecting DIRECTV. But while AT&T’s commitment to the satellite TV service has wavered over the years, it has been more aggressive in recent months in wooing new subs. By example, DIRECTV’s new customer offer now includes free NBA League Pass, free NFL Sunday Ticket, one year free of HBO Max, and three free months of several other premium channels. AT&T may be trying to boost subs to impress a future buyer, but you can’t accuse it now of not trying.
However, if there is no prospect of a sale, I can’t imagine AT&T would continue to go to that trouble. Why try to lure new subscribers when your company’s position is that it’s unlikely to be successful?
Instead, AT&T would try to squeeze as much revenue from DIRECTV as possible, as long as possible, by reducing costs and increasing prices. (It would also continue trying to convert DIRECTV subscribers to AT&T TV, its new Internet-based service.) At some point, when subscriber numbers have dropped to unmanageable levels, it would then pull the plug.
Claire, I hope that helps. The TV Answer Man will continue to monitor this situation and report back here if anything new occurs.
Until then, happy viewing and stay safe!
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— Phillip Swann