By Phillip Swann
The TV Answer Man – @tvanswerman
TV Answer Man, who do you think AT&T will sell DIRECTV to? Dish? That makes sense, right? And when do you think the sale will happen? — Gerard, Springfield, Illinois.
Gerard, those questions are undoubtedly prompted by a recent article by Bloomberg News that says AT&T is reviewing options for its 70 percent stake in DIRECTV, including the possibility of selling it. Since the article’s publication, I have seen several stories — and online comments from industry pundits — that suggest the sale is a fait accompli because Bloomberg just reported that it is. But hold on, folks. Bloomberg reports that AT&T, which purchased DIRECTV in 2015 but spun off the company in 2021, selling a 30 percent stake to private equity firm, TPG, is only considering selling its stake. Among the other options, the news service says, are a dividend recapitalization, adding a new investor, or, yes, selling the stake entirely and leaving the business. There’s no guarantee that AT&T will sell out and it says here there’s a good chance that it won’t. Why?
Because there are not many companies that might want to buy it. DIRECTV has lost 13 million subscribers since AT&T first bought in 2015 and the subscriber defections are not slowing down. Yes, you can still squeeze some profits out of the business but it’s getting increasingly difficult.
Dish, the company’s longtime satellite rival, would be a likely candidate to buy DIRECTV’s stake, but merger talks between the two have been unproductive over the years. There’s also a question of whether Dish could get the money to buy a majority stake in DIRECTV. Dish has struggled to find funding for its 5G wireless initiative and faces its own decline in video subscribers.
AT&T, whose sale of 30 percent TPG includes the out clause for next year, is wise to do the due diligence for its remaining 70 percent. But it might find that selling 70 percent of a business in rapid decline is a bad financial decision. It might instead do the dividend recapitalization, a financial strategy used by companies to return cash to shareholders or investors by taking on additional debt. Or perhaps it could get another company to take a minority stake. AT&T wants to pump more revenue out of its DIRECTV investment and either of those two moves could be a more realistic play.
Gerard, hope that makes sense. Happy viewing and stay safe!
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— Phillip Swann