Since AT&T announced on February 25 that it was selling a 30 percent stake in DIRECTV, many industry analysts, journalists, and subscribers have wondered why. The satellite TV service has lost more than six million customers since AT&T purchased it in 2015, but what is the benefit now of selling a minority share to a private equity firm, TPG. Was the sale a desperate move to eliminate some corporate debt, or does AT&T believe that it can somehow transform the satcaster’s business?
John Stephens, AT&T’s chief financial officer, addressed that question yesterday in a presentation to a Deutsche Bank media conference and here are the highlights of his remarks:
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Stephens said the deal, which calls for DIRECTV to be a separate company after its close, means more resources and focus for the satcaster.
Many have noted that AT&T has often seemed to neglect DIRECTV during its nearly six-year ownership. The telco has launched two different live streaming services (AT&T TV, AT&T TV Now, formerly known as DIRECTV Now) since the purchase as well as HBO Max, a new competitor in the Video on Demand streaming category. This has distracted AT&T’s executives from focusing on DIRECTV during a time when they desperately needed to do so. With cord-cutting escalating, DIRECTV needs a new strategy and tools to attract new customers and keep old ones.
The new DIRECTV will have a new CEO, current AT&T executive Bill Morrow, as well as a new five-member board that will include two TPG appointees. TPS is expected to be heavily involved in reshaping the satellite TV service.
“(The sale) gets focus, focus for the DIRECTV business outside the big machine that is AT&T,” Stephens said.
The financial officer added that the added attention could benefit AT&T TV and DIRECTV. (The new DIRECTV will also include AT&T TV and U-verse; there was no mention of U-verse in yesterday’s discussion.)
“Additionally, it gives us optionality. If there is an opportunity to improve the operations business, if there is an opportunity to take AT&T TV to a further level, if there is opportunities to further manage costs, we’ll benefit from that and we’ll benefit because we still have 70% ownership. So from that perspective, it made sense and it was the right thing to do and TPG is the right partner,” Stephens said.
Stephens said the sale will continue to allow AT&T to bundle DIRECTV with company products such as phone and Broadband, and HBO Max.
“I will point out, not only do we have a 70 percent economic interest going forward but we’re going to provide a transition services arrangement,” Stephens said. “We’re going to be able to continue to bundle video products with our broadband, with our wireless. We’re going to have — there’s going to be that encouragement going both ways. And quite frankly, they’re going to be a big business partner in the sense of they’re still one of our largest content buyers for TNT and TBS and CNN. So this is a partnership that we look to work with them closely, but we appreciate the skills and focus that they’re going to bring to that business for improvement.”
But despite the potential operational benefits, Stephens acknowledged that there was also an important financial reason for the deal. TPG is giving $7.8 billion to AT&T for its stake, which will help the latter reduce corporate debt.
“We get that, I say about $8 billion, $7.8 billion upfront,” Stephens said. “The next $1.8 billion, if you will, is — goes to TPG to turn their preferreds and then we get our remaining $8 billion, $8.5 billion investment out as an recovery. And then we start sharing in the remainder, 70-30. So we feel in a very good position to recover all of our funds and the opportunity to have a positive opportunity going forward from the partnership.”
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Stephens is a DREAMER.
ALL BS and NO Improvement.
AT&T needs to let DirecTV be managed by someone else.
AT&T has a track record of DESTROYING anything it touches today
I hear you, and no mention of improving the customer experience.
I did NOT mention the customer experience
because It has been discussed MANY Times before.
It does NOT Exist
AT&T has NO Intention of ever having
ANYONE answer the phone that
knows how to speak ENGLISH or
if they make a noise have ANY IDEA
how to help you.
I gave up on that a while back.
AT&T HATES Customers
If Direct TV wants to recoup subscribers have them offer east/west coast coverage to full time RV travelers. We had the RV waiver since we are full time RVers and now we cannot receive network channels. Direct is not allowing us to change to local channels wherever we are at. We often can not receive the local channels with our antenna. Dish is more user friendly but not by much. There are a lot of RVers out there who would return to Direct if the waiver was offered.
I think both of the carriers suck, Nobody speaks English, They say their sending you something for free and then they charge you,
Then they want me to sign up for their t.v. program.
I’m about to steps from the door to throw it all away.
I find since At&T took over Direct Tv it’s been a mistake.Glad they are parting.I have been with Direct for at least 10 years.Sick of the prices going up for I am on S.S .Now, because they are splitting my bill will go up 10.00 more.May have to switch soon.
They need to tell the truth After telling me that I would get nfl package for free because they forgot to automatically renewed they charge it away