AT&T will offload its DirecTV operations in a deal with private equity firm TPG that values the business at about US$16 billion, a fraction of what the telecom giant paid for the satellite-TV company in 2015.
The move caps years of AT&T deliberating over what to do with DirecTV, a pay-television pioneer that had increasingly become a burden as it hemorrhaged customers.
As part of the agreement, a joint venture with TPG will run DirecTV and AT&T’s other pay-TV operations, the companies announced on Thursday, February 25. AT&T will get US$7.6 billion in cash from the transaction, with the new DirecTV taking on US$5.8 billion in committed debt financing.
TPG is acquiring a 30% stake in the business, leaving AT&T with 70% of the new entity. A key benefit for the phone company will be the removal of DirecTV from its books, though the transaction doesn’t include Latin America operations.
With the sale, AT&T is taking a big step toward becoming a smaller, modern communications and media company. It also helps the carrier balance competing cash demands. AT&T is funneling money into its 5G network, film, and TV programming production and dividends of almost US$15 billion a year, as well as paying interest on nearly US$154 billion in long-term debt.
Acquiring DirecTV six years ago for US$48 billion made AT&T the largest pay-TV provider in the US, but it also became the biggest victim of cord cutting that swept the industry, with customers jettisoning pay-TV packages in favor of streaming services.
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